Studies on N-linked oligosaccharide processing were undertaken in HepG2 cells and calf thyroid slices to explore the possibility that the recently described Golgi endo-alpha-D-mannosidase (Lubas, W.A., and Spiro, R.G. (1987) J. Biol. Chem. 262, 3775-3781) is responsible for the frequently noted failure of glucosidase inhibitors to achieve complete cessation of complex carbohydrate unit synthesis. We have found that in the presence of the glucosidase inhibitors, castanospermine (CST) or 1-deoxynojirimycin, there is a substantial production of the glucosylated mannose saccharides (Glc3Man, Glc2Man, and Glc1Man) which are the characteristic products of endomannosidase action. Furthermore, in HepG2 cells, a secretion of these components into the medium could be demonstrated. Characterization of the N-linked polymannose oligosaccharides produced by HepG2 cells in the presence of CST (as well as 1-deoxymannojirimycin to prevent processing by alpha-mannosidase I) indicated the occurrence, in addition to the expected glucosylated species, of substantial amounts of Man8GlcNAc and Man7GlcNAc. Since Man9GlcNAc was almost completely absent and the Man8GlcNAc isomer was shown to be identical with that formed by the in vitro action of endomannosidase on glucosylated polymannose oligosaccharides, we concluded that this enzyme was actively functioning in the intact cells and could provide a pathway for circumventing the glucosidase blockade. Indeed, quantitative studies in HepG2 cells supported this contention as the continued formation of complex carbohydrate units (50% of control) during CST inhibition could be accounted for by the deglucosylation effected by endomannosidase.