Protein degradation in the exocytic pathway was studied in Saccharomyces cerevisiae using human alpha-1-protease inhibitor (A1Pi) as a reporter molecule. Yeast cells transformed with A1Pi cDNA genes synthesized A1Pi that entered the secretion pathway and accumulated in the endoplasmic reticulum (ER). Cells expressing A1PiM (wild-type) accumulated about 10-fold more A1Pi than cells expressing A1PiZ (secretion defective variant). Analyses of A1Pi mRNA indicated that the low level of A1PiZ relative to A1PiM was not the result of differential gene transcription. Pulse-chase A1Pi radiolabeling showed that A1PiM and A1PiZ were degraded at different rates and suggested a rapid specific turnover of newly synthesized A1PiZ in the ER. Accumulated A1Pi was degraded at comparable rates in both wild-type cells and cells deficient in vacuolar protease activity, indicating that degradation of A1Pi did not occur in the vacuole. Studies to investigate the intracellular location of the degradative process, using temperature-sensitive secretion defective yeast strains, suggested the possibility that degradation occurs not only in the ER but at a second site accessed by vesicle transport. Together, these results demonstrate that a selective protein degradation process operates early in the yeast cell exocytic pathway.