The biosynthesis of hormones and neuropeptides involves post-translational cleavage of precursors at basic amino acids by prohormone convertases (PCs) predominantly in secretory granules that bud from the trans-Golgi Network. This study reports that the amino acid sequence of PC3 (aa617-638), previously identified as a novel transmembrane (TM) domain, confers lipid raft association and facilitates sorting of the enzyme to the secretory granules of Neuro2A cells for prohormone cleavage. Floatation analysis on sucrose density gradients showed that a proportion of full length (PC3-FL) and carboxyl terminus-truncated PC3(1-638) (PC3-638) containing the TM domain were associated with lipid rafts in Neuro2A cells, while PC3(1-616) (PC3-616) and PC3-DeltaTM lacking the TM domain were not. Secondly, PC3-FL and PC3-638 underwent stimulated secretion and were shown to be colocalized with a secretory granule marker, chromogranin A, by immunocytochemistry. In contrast, PC3-616 and PC3-DeltaTM were constitutively secreted and primarily localized in the Golgi. These data indicate that the transmembrane domain of PC3 plays a key role in sorting the enzyme to the regulated secretory pathway.