The small GTPase Rab2 is a resident of pre-Golgi intermediates and required for protein transport from the endoplasmic reticulum (ER) to the Golgi complex (Tisdale, E. J., Bourne, J. R., Khosravi-Far, R. , Der, C. J., and Balch, W. E. (1992) J. Cell Biol. 119, 749-761). The Rab2 protein, like all small GTPases, contains conserved GTP-binding domains as well as hypervariable carboxyl-terminal and amino-terminal domains. While the role of the carboxyl terminus in specific membrane localization is well recognized, the potential role of the variable NH2 terminus remains to be clarified. To determine whether the NH2 terminus of Rab2 was required for its activity in vivo, a trans dominant mutant of Rab2 that inhibits ER to Golgi transport was progressively truncated and analyzed for its effect on vesicular stomatitis virus glycoprotein transport in a vaccinia-based transient expression system. Deletion of the first 14 amino-terminal residues resulted in the loss of the inhibitory properties of the mutant without affecting its post-translational processing or membrane association. To assess the potential role of the NH2 terminus in Rab2 function, a peptide corresponding to the first 13 amino acids following the initiator methionine was introduced into an in vitro assay that efficiently reconstitutes transport of vesicular stomatitis virus glycoprotein from the ER to the Golgi stack. This peptide was a potent inhibitor of transport. Biochemical and morphological studies revealed that the peptide strongly interfered with assembly of pre-Golgi intermediates which mediate segregation of anterograde and retrograde transported proteins en route to the Golgi. The combined results suggest that the NH2 terminus of Rab2 is required for its function and for direct interaction with components of the transport machinery involved in the maturation of pre-Golgi intermediates.