Lipoproteins are localized in the outer or inner membrane of Escherichia coli, depending on the species of amino acid located next to the N-terminal fatty acylated Cys. The major outer membrane lipoprotein (Lpp) expressed in spheroplasts was, however, retained in the inner membrane as a mature form. A novel protein that is essential for the release of Lpp from the inner membrane was discovered in the periplasm and purified. The partial amino acid sequence of this 20 kDa protein (p20) was determined and used to clone a gene for p20. Sequencing of the gene revealed that p20 is synthesized as a precursor with a signal sequence. p20 formed a soluble complex only with outer membrane-directed lipoproteins such as Lpp, indicating that p20 plays a critical role in the sorting of lipoproteins. Lpp released from the inner membrane in the presence of p20 was specifically assembled into the outer membrane in vitro. These results indicate that p20 is a periplasmic carrier protein involved in the translocation of lipoproteins from the inner to the outer membrane.