We studied ultrastructural localization of acid phosphatase in derepressed Saccharomyces cerevisiae cells transformed with a multicopy plasmid carrying either the wild-type PHO5 gene or a PHO5 gene deleted in the region overlapping the signal peptidase cleavage site. Wild-type enzyme was located in the cell wall, as was 50% of the modified protein, which carried high-mannose-sugar chains. The remaining 50% of the protein was active and core glycosylated, and it accumulated in the endoplasmic reticulum cisternae. The signal peptide remained uncleaved in both forms. Cells expressing the modified protein exhibited an exaggerated endoplasmic reticulum with dilated lumen.