OBJECTIVE Type II collagen (CII) is a candidate autoantigen implicated in the pathogenesis of rheumatoid arthritis (RA). Posttranslational glycosylation of CII could alter intracellular antigen processing, leading to the development of autoimmune T cell responses. To address this possibility, we studied the intracellular processing of CII for presentation of the arthritogenic glycosylated epitope CII(259-273) to CD4 T cells in macrophages from HLA-DR1-transgenic mice. METHODS HLA-DR1-transgenic mice were generated on a class II major histocompatibility complex-deficient background, and T cell hybridomas specific for the glycosylated and nonglycosylated epitope CII(259-273) were developed. Subcellular fractionation of macrophages was used to localize CII degradation to particular compartments and to identify the catalytic subtype of proteinases involved. RESULTS We showed that the glycosylated CII(259-273) epitope required more extensive processing than did the nonglycosylated form of the same epitope. Dense fractions containing lysosomes were primarily engaged in the processing of CII for antigen presentation, since these compartments contained 1) enzyme activity that generated antigenic CII fragments bearing the arthritogenic glycosylated epitope, 2) the antigenic CII fragments themselves, 3) CII peptide-receptive HLA-DR1 molecules, and 4) peptide/HLA-DR1 complexes that could directly activate T cell hybridomas. Degradation of CII by dense fractions occurred optimally at pH 4.5 and was abrogated by inhibitors of serine and cysteine proteinases. CONCLUSIONS Processing of the arthritogenic glycosylated CII(259-273) epitope, which is implicated in the induction of autoimmune arthritis, is more stringently regulated than is processing of the nonglycosylated form of the same epitope. Mechanisms of intracellular processing of the glycosylated epitope may constitute novel therapeutic targets for the treatment of RA.