In the beta-cells of pancreatic islets, insulin is stored as the predominant protein within storage granules that undergo regulated exocytosis in response to glucose. By pulse-chase analysis of radiolabeled protein condensation in beta-cells, the formation of insoluble aggregates of regulated secretory protein lags behind the conversion of proinsulin to insulin. Condensation occurs within immature granules (IGs), accounting for passive protein sorting as demonstrated by constitutive-like secretion of newly synthesized C-peptide in stoichiometric excess of insulin (Kuliawat, R., and P. Arvan. J. Cell Biol. 1992. 118:521-529). Experimental manipulation of condensation conditions in vivo reveals a direct relationship between sorting of regulated secretory protein and polymer assembly within IGs. By contrast, entry from the trans-Golgi network into IGs does not appear especially selective for regulated secretory proteins. Specifically, in normal islets, lysosomal enzyme precursors enter the stimulus-dependent secretory pathway with comparable efficiency to that of proinsulin. However, within 2 h after synthesis (the same period during which proinsulin processing occurs), newly synthesized hydrolases are fairly efficiently relocated out of the stimulus-dependent pathway. In tunicamycin-treated islets, while entry of new lysosomal enzymes into the regulated secretory pathway continues unperturbed, exit of nonglycosylated hydrolases from this pathway does not occur. Consequently, the ultimate targeting of nonglycosylated hydrolases in beta-cells is to storage granules rather than lysosomes. These results implicate a post-Golgi mechanism for the active removal of lysosomal hydrolases away from condensed granule contents during the storage process for regulated secretory proteins.