We have established the main post-translational modification of the major exoglucanase of Saccharomyces cerevisiae as the enzyme progresses through the secretory pathway. The protein portion of the enzyme accumulated by sec18 cells was about 2 kDa larger than that of the secreted enzyme. This precursor (form A) was stable when maintained in the endoplasmic reticulum but was processed to the mature form (form B) before the block imposed by the sec7 mutation. Sec7 cells, when incubated at 37 degrees C, accumulated form B first, but upon prolonged incubation, form A was preferentially accumulated. When the supply of newly synthesized exoglucanase was prevented by the addition of cycloheximide, the accumulated A was transformed into B in the presence of altered Sec7p that still prevented secretion. Conversion of A into B was prevented in the double mutant sec7 kex2-1, indicating that Kex2p is central to the in vivo processing. Consistent with this, a KEX2 deletion mutant secreted form A exclusively. Conversion of A into B was also prevented in sec7 cells by the presence of dinitrophenol, a poison that depletes ATP levels, indicating that processing is dependent upon intracellular transport which involves ER --> Golgi and/or, at least, one intra-Golgi step(s). It follows that this transport step(s) is independent of functional Sec7p.