The K-Cl cotransporter (KCC) functions in maintaining chloride and volume homeostasis in a variety of cells. In the process of cloning the mouse KCC3 cDNA, we came across a cloning mutation (E289G) that rendered the cotransporter inactive in functional assays in Xenopus laevis oocytes. Through biochemical studies, we demonstrate that the mutant E289G cotransporter is glycosylation-deficient, does not move beyond the endoplasmic reticulum or the early Golgi, and thus fails to reach the plasma membrane. We establish through co-immunoprecipitation experiments that both wild-type and mutant KCC3 with KCC2 results in the formation of hetero-dimers. We further demonstrate that formation of these hetero-dimers prevents the proper trafficking of the cotransporter to the plasma membrane, resulting in a significant decrease in cotransporter function. This effect is due to interaction between the K-Cl cotransporter isoforms, as this was not observed when KCC3-E289G was co-expressed with NKCC1. Our studies also reveal that the glutamic acid residue is essential to K-Cl cotransporter function, as the corresponding mutation in KCC2 also leads to an absence of function. Interestingly, mutation of this conserved glutamic acid residue in the Na(+)-dependent cation-chloride cotransporters had no effect on NKCC1 function in isosmotic conditions, but diminished cotransporter activity under hypertonicity. Together, our data show that the glutamic acid residue (E289) is essential for proper trafficking and function of KCCs and that expression of a non-functional but full-length K-Cl cotransporter might results in dominant-negative effects on other K-Cl cotransporters.