We have localized proinsulin in B cells of human and rat pancreatic islets, using a proinsulin-specific monoclonal antibody revealed by immunocytochemistry. Proinsulin is abundant in Golgi stacks and clathrincoated secretory granules. It rapidly disappears from these compartments when protein synthesis is inhibited. Depletion of ATP stores prevents movement of proinsulin from the Golgi stacks to the secretory granules; under these conditions, the prohormone in preformed coated granules is converted to insulin, whereas that bound to the Golgi complex is not. Noncoated granules show a low level of prolnsulin reactivity under all incubation protocols. These findings provide direct evidence that coated secretory granules are the major, if not the only, cellular site of proinsulin to insulin conversion. They also suggest that the Golgi stack is not involved in conversion, and that intercisternal transport and coated granule formation are hitherto unrecognized energy-requiring steps that precede conversion.