We recently reported the positional cloning of a candidate gene for hereditary hemochromatosis (HH), called HLA-H, which is a novel member of the major histocompatibility complex class I family. A mutation in this gene, cysteine 282 --> tyrosine (C282Y), was found to be present in 83% of HH patient DNAs, while a second variant, histidine 63 --> aspartate (H63D), was enriched in patients heterozygous for C282Y. The functional relevance of either mutation has not been described. Co-immunoprecipitation studies of cell lysates from human embryonic kidney cells transfected with wild-type or mutant HLA-H cDNA demonstrate that wild-type HLA-H binds beta2-microglobulin and that the C282Y mutation, but not the H63D mutation, completely abrogates this interaction. Immunofluorescence labeling and subcellular fractionations demonstrate that while the wild-type and H63D HLA-H proteins are expressed on the cell surface, the C282Y mutant protein is localized exclusively intracellularly. This report describes the first functional significance of the C282Y mutation by suggesting that an abnormality in protein trafficking and/or cell-surface expression of HLA-H leads to HH disease.