Secretory proteins that fail to fold in the endoplasmic reticulum (ER) are transported back to the cytosol and degraded by proteasomes. It remains unclear how the cell distinguishes between folding intermediates and misfolded proteins. We asked whether misfolded secretory proteins are covalently modified in the ER before export. We found that a fraction of mutant alpha-factor precursor, but not the wild type, was progressively O-mannosylated in microsomes and in intact yeast cells by protein O-mannosyl transferase 2 (Pmt2p). O-Mannosylation increased significantly in vitro under ER export conditions, i.e., in the presence of ATP and cytosol, and this required export-proficient Sec61p in the ER membrane. Deletion of PMT2, however, did not abrogate mutant alpha-factor precursor degradation but, rather, enhanced its turnover in intact yeast cells. In vitro, O-mannosylated mutant alpha-factor precursor was stable and protease protected, and a fraction was associated with Sec61p in the ER lumen. Thus, prolonged ER residence allows modification of exposed O-mannosyl acceptor sites in misfolded proteins, which abrogates misfolded protein export from the ER at a posttargeting stage. We conclude that there is a limited window of time during which misfolded proteins can be removed from the ER before they acquire inappropriate modifications that can interfere with disposal through the Sec61 channel.