The lsp gene of Escherichia coli encodes the inner membrane enzyme, signal peptidase II (SPase II). SPase II is comprised of 164 amino acid residues and contains four hydrophobic domains. A series of lsp-phoA and lsp-lacZ gene fusions have been constructed in vitro to determine the topology of SPase II. The fusion junction for each of these gene fusions was determined by DNA sequencing. The lengths of the SPase II fragment in the fusions varied from 12 to 159 amino acid residues. Strains containing SPase II-PhoA fusions to the two predicted periplasmic loops exhibited higher levels of alkaline phosphatase activity than fusions to the predicted cytoplasmic domains. In contrast, SPase II-LacZ fusions at the cytoplasmic and the periplasmic domains of SPase II showed high and low levels of beta-galactosidase activity, respectively, a result opposite to those shown by SPase II-PhoA fusions located at precisely the same amino acid of SPase II. Taken together, these results strongly support the predicted model for SPase II topology, i.e. this enzyme spans the cytoplasmic membrane four times with both the amino and the carboxyl termini facing the cytoplasm.