When rat liver microsomal aldehyde dehydrogenase (msALDH) was overexpressed in COS-1 cells by cDNA transfection, large granular structures containing both msALDH and endogenous protein disulfide isomerase appeared (Masaki et al. (1994) J. Cell Biol. 126, 1407-1420). Confocal laser microscopy revealed that these granular structures are dispersed throughout the cytoplasm. Electron microscopy showed that the structures are composed of regularly arranged crystalloid smooth endoplasmic reticulum (ER). The formation of the crystalloid ER was accompanied by a remarkable proliferation of smooth ER, which appeared occasionally continuous to the rough ER. We suggest that the smooth ER, proliferated from the rough ER, is transformed and assembled into the crystalloid ER by head-to-head association of the msALDH molecules on the apposed smooth ER membranes. In order to understand the molecular mechanism of the crystalloid ER formation, we asked which portions of the msALDH molecules are needed for the crystalloid ER formation by expressing deletion mutants or chimera protein of msALDH in COS-1 cells. The overexpression of msALDH molecules lacking the stem region preceding the membrane spanning region, although they were exclusively localized in the ER, did not induce the formation of crystalloid ER. More detailed analysis showed that the amino acid sequence FFLL, located in the stem region, is necessary to form the crystalloid ER. The chimera protein containing the last 35 amino acids of msALDH at the carboxyl terminus of chloramphenicol acetyltransferase was localized to the ER, but did not induce the formation of the crystalloid ER. These results suggest that at least two regions, the bulky amino-terminal region and the FFLL sequence in the stem region of msALDH molecules are required for the formation of the crystalloid ER.