Secretion of proteins is initiated by their uptake into the endoplasmic reticulum (ER), which possesses a proteolytic system able to degrade misfolded and nonassembled proteins. The ER degradation system was studied with yeast mutants defective in the breakdown of a mutated soluble vacuolar protein, carboxypeptidase yscY (CPY*). The ubiquitin-conjugating enzyme Ubc7p participated in the degradation process, which was mediated by the cytosolic 26S proteasome. It is likely that CPY* entered the ER, was glycosylated, and was then transported back out of the ER lumen to the cytoplasmic side of the organelle, where it was conjugated with ubiquitin and degraded.