Glucosidase II is essential for sequential removal of two glucose residues from N-linked glycans during glycoprotein biogenesis in the endoplasmic reticulum. The enzyme is a heterodimer whose alpha-subunit contains the glycosyl hydrolase active site. The function of the beta-subunit has yet to be defined, but mutations in the human gene have been linked to an autosomal dominant form of polycystic liver disease. Here we report the identification and characterization of a Saccharomyces cerevisiae gene, GTB1, encoding a polypeptide with 21% sequence similarity to the beta-subunit of human glucosidase II. The Gtb1 protein was shown to be a soluble glycoprotein (96-102 kDa) localized to the endoplasmic reticulum lumen where it was present in a complex together with the yeast alpha-subunit homologue Gls2p. Surprisingly, we found that Deltagtb1 mutant cells were specifically defective in the processing of monoglucosylated glycans. Thus, although Gls2p is sufficient for cleavage of the penultimate glucose residue, Gtb1p is essential for cleavage of the final glucose. Our data demonstrate that Gtb1p is required for normal glycoprotein biogenesis and reveal that the final two glucose-trimming steps in N-glycan processing are mechanistically distinct.