Kex2 protease processes pro-α-factor in a late Golgi compartment in Saccharomyces cerevisiae. The first ~30 residues of the 115 amino acid CO2H-terminal cytosolic tail (C-tail) of the Kex2 protein (Kex2p) contain a Golgi retention signal that resembles coated-pit localization signals in mammalian cell surface receptors. Mutation of one (Tyr713) of two tyrosine residues in the C-tail or deletion of sequences adjacent to Tyr713 results in loss of normal Golgi localization. Surprisingly, loss of the Golgi retention signal resulted in transport of C-tail mutant Kex2p to the vacuole (yeast lysosome), as judged by kinetics of degradation and by indirect immunofluorescence. Analysis of the loss of Kex2 function in vivo after shutting off expression of wild-type or mutant forms proved that mutations that cause rapid vacuolar turnover do so by increasing the rate of exit of the enzyme from the pro-α-factor processing compartment. The most likely explanation for these results is that mutation of the Golgi retention signal in the C-tail results in transport of Kex2p to the vacuole by default. Wild- type Kex2p also was transported to the vacuole at an increased rate when overproduced, although apparently not due to saturation of a Golgi-retention mechanism. Instead, the wild-type and C-tail mutant forms of Kex2p may follow distinct paths to the vacuole.