The major histocompatibility complex (MHC) class II-associated invariant chain (Ii) is thought to act as a chaperone that assists class II during folding, assembly, and transport. To define more precisely the role of Ii chain in regulating class II function, we have investigated in detail the biosynthesis, transport, and intracellular distribution of class II molecules in splenocytes from mice bearing a deletion of the Ii gene. As observed previously, the absence of Ii chain caused significant reduction in both class II-restricted antigen presentation and expression of class II molecules at the cell surface because of the intracellular accumulation of alpha and beta chains. Whereas much of the newly synthesized MHC molecules enter a high molecular weight aggregate characteristic of misfolded proteins, most of the alpha and beta chains form dimers and acquire epitopes characteristic of properly folded complexes. Although the complexes do not bind endogenously processed peptides, class II molecules that reach the surface are competent to bind peptides added to the medium, further demonstrating that at least some of the complexes fold properly. Similar to misfolded proteins, however, the alpha and beta chains are poorly terminally glycosylated, suggesting that they fail to reach the Golgi complex. As demonstrated by double label confocal and electron microscope immunocytochemistry, class II molecules were found in a subcompartment of the endoplasmic reticulum and in a population of small nonlysosomal vesicles possibly corresponding to the intermediate compartment or cis-Golgi network. Thus, although alpha and beta chains can fold and form dimers on their own, the absence of Ii chain causes them to be recognized as "misfolded" and retained in the same compartments as bona fide misfolded proteins.