Belgrade rats have an autosomal recessive anemia with hypochromia and microcytosis. Iron uptake into reticulocytes is approximately 20% of normal, but transferrin uptake is unimpaired. We have systematically compared the transferrin cycle in Belgrade versus normal reticulocytes to locate the defect more precisely. Belgrade transferrin was functionally normal as purified transferrin or whole plasma. Transferrin affinity of Belgrade receptors was indistinguishable from normal, but Belgrade reticulocytes had twice as many receptors. Belgrade transferrin endocytosis was 1.5 times faster than normal, whereas exocytosis is about twice as fast. Initially Belgrade reticulocytes internalize iron at an unimpaired rate, but they lag behind normal by 5 min. During reincubation, they release 25-33% of iron taken up during a 30-min preincubation, whereas normal cells do not lose a detectable fraction. Unexpectedly, transferrin cycle time was unchanged. Hence another kinetic step of the cycle is slower, compensating for increases in Belgrade endocytosis and exocytosis. After one cycle, Belgrade reticulocytes retain only half of the iron that entered, but over 90% of iron entering normal cells remains within. Iron unloading is ineffective inside the Belgrade vesicle; 85% of iron that entered on transferrin returned to the medium after exocytosis, whereas only 45% of iron entering normal reticulocytes exits. Ineffective utilization of iron in or near Belgrade endosomes accounts for the Belgrade defect.