T2 cells have a large homozygous deletion in the MHC II region. Transfection of MHC class II genes into T2 cells allows presentation of peptide but not native protein Ags. This defect in protein presentation has been attributed to the lack of HLA-DM, an MHC class II-related protein that facilitates the release of an invariant chain peptide (CLIP) intermediate from nascent MHC class II proteins within the endocytic compartment of APC. Here, we show that Ak molecules within isolated late endosome fractions of T1.Ak (wild-type) vs T2.Ak (HLA-DM-deficient) bind biotin-HEL46-61 at comparable levels, consistent with previous observations that Ak molecules on T2 cells are not predominantly occupied with CLIP. However, Ak molecules in the late endosomes of T2.Ak fail to present peptide to a T hybrid, whereas the late endosomes from T1.Ak have no such defect. Transfection of HLA-DM A and B into T2.Ak partially restores protein Ag presentation by T2.Ak cells. These data suggest that HLA-DM can play a role in Ag presentation in addition to its role in CLIP release. However, even after DM transfection there remains a 10-fold difference in the dose-response curve for hen egg lysozyme presentation by T1.Ak vs T2.Ak/DM cells. In addition, HLA-DM transfection fails to restore presentation by late endosome fractions. The failure to fully restore Ag presentation in T2.Ak cells by DM transfection suggests that another gene product, required for efficient Ag presentation, may be absent from the late endosomes of T2.