The recycling heparan sulfate (HS)-containing proteoglycan glypican-1 (Gpc-1) is processed by nitric oxide (NO)-catalyzed deaminative cleavage of its HS chains at N-unsubstituted glucosamines. This generates anhydromannose (anMan)-containing HS degradation products that can be detected by a specific antibody. Here we have attempted to identify the intracellular compartments where these products are formed. The anMan-positive degradation products generated constitutively in human bladder carcinoma cell line (T24) or fibroblasts appeared neither in caveolin-1-associated vesicles nor in lysosomes. In Niemann-Pick C-1 (NPC-1) fibroblasts, where deaminative degradation is abrogated, formation of anMan-positive products can be restored by ascorbate. These products colocalized with Rab7, a marker for late endosomes. When NO-catalyzed degradation of HS was depressed in mouse neuroblastoma cell line (N2a) by using 3-beta[2(diethylamino) ethoxy]androst-5-en-17-one (U18666A), both ascorbate and dehydroascorbic acid restored formation of anMan-positive products that colocalized with Rab7. In T24 cells, constitutively generated anMan-positive products colocalized with both Rab7 and Rab9, whereas Gpc-1 colocalized with Rab9, a marker for transporting endosomes. Inhibition of endosomal acidification, which blocks transfer from early (Rab5) to late (Rab7) endosomes, abrogated deaminative degradation of HS. This could also be overcome by the addition of ascorbate, which induced formation of anMan-positive degradation products that colocalized with Rab7. After (35)S-sulfate labeling, similar degradation products were recovered in Rab7-positive vesicles. We conclude that NO-catalyzed degradation of HS may begin in early endosomes but is mainly taking place in late endosomes.