Glycophosphatidylinositol (GPI)-anchored membrane proteins are initially synthesized with a cleavable COOH-terminal extension that signals anchor attachment. Overexpression in COS cells of hGH-DAF fusion proteins containing the GPI signal of decay accelerating factor (DAF) fused to the COOH-terminus of human growth hormone (hGH), produces both GPI-anchored hGH-DAF and uncleaved precursors that retain the GPI signal. Using hGH-DAF fusion proteins containing a mutated, noncleavable GPI signal, we show that uncleaved polypeptides are retained inside the cell and accumulate in a brefeldin A-sensitive, Golgi-like juxtanuclear structure. Retention requires the presence of either a functional or a noncleavable GPI signal; hGH-DAF fusion proteins containing only the COOH-terminal hydrophobic domain (a component of the GPI signal) are secreted. Immunofluorescence analysis shows colocalization of the retained, uncleaved fusion proteins with both a Golgi marker and with p53, a marker of the ER-Golgi intermediate compartment. Since N-linked glycosylation is postulated to facilitate the transport of proteins to the cell surface, we engineered a glycosylation site into hGH-DAF. Glycosylation failed to completely override the transport block, but allowed some uncleaved hGH-DAF to pass through the secretory pathway and acquire endoglycosidase H resistance. The retained molecules remained endoglycosidase H sensitive. We suggest that the uncleaved fusion protein is retained in a sorting compartment between the ER and the medial Golgi complex. We speculate that a mechanism exists to retain proteins containing an uncleaved GPI signal as part of a system for quality control.