The human invariant chain (I gamma) of class II histocompatibility antigens spans the membrane of the endoplasmic reticulum once. It exposes a small amino-terminal domain on the cytoplasmic side and a carboxy-terminal, glycosylated domain on the exoplasmic side of the membrane. When the exoplasmic domain of I gamma is replaced by the cytoplasmic protein chloramphenicol acetyltransferase (CAT), CAT becomes the exoplasmic, glycosylated domain of the resulting membrane protein I gamma CAT. Deletion of the hydrophilic cytoplasmic domain from I gamma CAT gives rise to a secreted protein from which an amino-terminal segment is cleaved, most likely by signal peptidase. We conclude that the membrane-spanning region of I gamma contains a signal sequence in its amino-terminal half and that hydrophilic residues at the amino-terminal end of a signal sequence can determine cleavage by signal peptidase.