Localization of the 215 kd mannose 6-phosphate receptor (MPR) was studied in normal rat kidney cells. Low levels of receptor were detected in the trans Golgi network, Golgi stack, plasma membrane, and peripheral endosomes. The bulk of the receptor was localized to an acidic, reticular-vesicular structure adjacent to the Golgi complex. The structure also labeled with antibodies to lysosomal enzymes and a lysosomal membrane glycoprotein (lgp120). While lysosome-like, this structure is not a typical lysosome that is devoid of MPRs. The endocytic marker alpha 2 macroglobulin-gold entered the structure at 37 degrees C, but not at 20 degrees C. With prolonged chase, most of the marker was transported from the structure into lysosomes. We propose that the MPR/lgp-enriched structure is a specialized endosome (prelysosome) that serves as an intermediate compartment into which endocytic vesicles discharge their contents, and where lysosomal enzymes are released from the MPR and packaged along with newly synthesized lysosomal glycoproteins into lysosomes.