Cytotoxic T lymphocytes (CTL) generally recognize peptides derived from endogenously expressed proteins in association with nascent major histocompatibility complex (MHC) class I molecules. In contrast, peptides derived from exogenous proteins associate with MHC class II following endocytosis to an endosomal compartment. However, we have recently demonstrated that exogenous fusion proteins consisting of the binding and translocating domains of Pseudomonas exotoxin (PE) fused with CTL epitopes derived from either influenza matrix protein (PEMa) or nucleoprotein are internalized, processed, targeted to and presented by MHC class I (Donnelly et al. 1993, Proc. Natl. Acad. Sci. USA 1993. 90: 3530). PE is known to be internalized, processed in endosomes, and translocated to the cytosol during intoxication of cells. However, our present studies demonstrate that, unlike PE, PEMa does not require translocation to the cytosol to exert its effect. First, two inhibitors of PE toxicity that exert their effects at steps subsequent to endosomal processing had no effect on the sensitization of target cells for CTL-mediated lysis by PEMa. NH4Cl, which inhibits PE by raising endosomal pH, and brefeldin A, which inhibits PE by disrupting the Golgi complex, did not inhibit sensitization of targets cells by PEMa. Second, PEMa was capable of sensitizing for lysis T2 mutant cells, which are defective in transport of peptides from the cytosol to the lumen of the endoplasmic reticulum for presentation by MHC class I. These results suggest that PEMa is proteolytically processed in endosomes, and association with MHC class I does not require nascent MHC molecules. Such a process may involve internalized MHC class I, and subsequent expression of the peptide-MHC complexes on the cell surface would then lead to recognition by CTL.