An intermediate of 35 kD accumulates transiently during ER degradation of the H2 subunit of the asialoglycoprotein receptor; it is derived by an endoproteolytic cleavage in the exoplasmic domain near the transmembrane region. In the presence of cycloheximide all of the precursor H2 is converted to this intermediate, which is degraded only after cycloheximide is removed (Wikström, L., and H. F. Lodish. 1991. J. Cell Biol. 113:997-1007). Here we have generated mutants of H2 that do not form the 35-kD fragment, either in transfected cells or during in vitro translation reactions in the presence of pancreatic microsomes. In transfected cells the kinetics of ER degradation of these mutant proteins are indistinguishable from that of wild-type H2, indicating the existence of a second pathway of ER degradation which does not involve formation of the 35-kD fragment. Degradation of H2 in the ER by this alternative pathway is inhibited by TLCK or TPCK, but neither formation nor degradation of the 35-kD fragment is blocked by these reagents. As determined by NH2-terminal sequencing of the 35-kD fragment, formed either in transfected cells or during in vitro translation reactions in the presence of pancreatic microsomes, the putative cleavage sites are between small polar, uncharged amino acid residues. Substitution of the residues NH2- or COOH-terminal to the cleavage site by large hydrophobic or charged ones decreased the amount of 35-kD fragment formed and in some cases changed the putative cleavage site. Cleavage can also be affected by amino acid substitutions (e.g., to proline or glycine) which change protein conformation. Therefore, the endoprotease that generates the 35-kD fragment has specificity similar to that of signal peptidase. H2a and H2b are isoforms that differ only by a pentapeptide insertion in the exoplasmic juxtamembrane region of H2a. 100% of H2a is degraded in the ER, but up to 30% of H2b folds properly and matures to the cell surface. The sites of cleavage to form the 35-kD fragment are slightly different in H2a and H2b. Two mutant H2b proteins, with either a glycine or proline substitution at the position of insertion of the pentapeptide in H2a, have metabolic fates similar to that of H2a. These mutations are likely to change the protein conformation in this region. Thus the conformation of the juxtamembrane domain of the H2 protein is important in determining its metabolic fate within the ER.