Secretory protein-encoding genes of Saccharomyces cerevisiae have been cloned by a novel procedure that is based on the functional selection of their fusions with acid phosphatase (APase) at the DNA level. DNA fragments that functionally replace the promoter and signal sequence-encoding regions of the PHO5 gene (encoding APase) have been obtained by positive selection from a pool of cloned random DNA fragments. Five unique DNA sequences containing the promoter, and encoding signal sequences have been isolated. We have also isolated the complete gene, SSP120, encoding one of these S. cerevisiae secretory proteins, SSP120. Gene disruption studies have shown that the SSP120 gene is not essential for viability and growth. The SSP120 amino acid (aa) sequence has 13.5% identity with the middle 88-250 aa residues of the chicken glycosylation site-binding protein. However, SSP120 disruption did not affect protein glycosylation in yeast. The present study provides an alternative approach for the isolation of genes encoding secretory proteins, in contrast to classical genetic approaches that require isolation of functionally defective mutations followed by gene isolation by functional complementation. The present procedure should contribute to our understanding of protein sorting by permitting the cloning of genes encoding proteins targeted to different organelles in the secretory pathway.