The vacuolar hydrolase protease B in Saccharomyces cerevisiae is synthesized as an inactive precursor (Prb1p). The precursor undergoes post-translational modifications while transiting the secretory pathway. In addition to N- and O-linked glycosylations, four proteolytic cleavages occur during the maturation of Prb1p. Removal of the signal peptide by signal peptidase and the autocatalytic cleavage of the large amino-terminal propeptide occur in the endoplasmic reticulum (ER). Two carboxy-terminal cleavages of the post regions occur in the vacuole: the first cleavage is catalyzed by protease A and the second results from autocatalysis. We have isolated a mutant, pbn1-1, that exhibits a defect in the ER processing of Prb1p. The autocatalytic cleavage of the propeptide from Prb1p does not occur and Prb1p is rapidly degraded in the cytosol. PBN1 was cloned and is identical to YCL052c on chromosome III. PBN1 is an essential gene that encodes a novel protein. Pbn1p is predicted to contain a sub-C-terminal transmembrane domain but no signal sequence. A functional HA epitope-tagged Pbn1p fusion localizes to the ER. Pbn1p is N-glycosylated in its amino-terminal domain, indicating a lumenal orientation despite the lack of a signal sequence. Based on these results, we propose that one of the functions of Pbn1p is to aid in the autocatalytic processing of Prb1p.