The previously observed (Walter, et al. 1981 J. Cell Biol. 91:545-550) inhibitory effect of SRP selectively on the cell-free translation of mRNA for secretory protein (preprolactin) was shown here to be caused by a signal sequence-induced and site-specific arrest in polypeptide chain elongation. The Mr of the SRP-arrested nascent preprolactin chain was estimated to be 8,000 corresponding to approximately 70 amino acid residues. Because the signal sequence of preprolactin comprises 30 residues and because approximately 40 residues of the nascent chain are buried (protected from protease) in the large ribosomal subunit, we conclude that it is the interaction of SRP with the amino-terminal signal peptide of the nascent chain (emerged from the large ribosomal subunit) that modulates translation and thereby causes an arrest in chain elongation. This arrest is released upon SRP-mediated binding of the elongation-arrested ribosomes to the microsomal membrane, resulting in chain completion and translocation into the microsomal vesicle.