Peptidylglycine alpha-amidating monooxygenase (PAM) catalyzes the COOH- terminal amidation of bioactive peptides through a two step reaction catalyzed by separate enzymes contained within the PAM precursor. To characterize the trafficking of integral membrane PAM proteins in neuroendocrine cells, we have generated stable AtT-20 cell lines expressing full length and COOH-terminally truncated integral membrane PAM proteins. Full length integral membrane PAM was present on the cell surface in low but detectable amounts and PAM proteins which reached the cell surface were rapidly internalized but not immediately degraded in lysosomes. Internalized PAM complexed with PAM antibody was found in a subcellular compartment which overlapped with internalized transferrin and with structures binding WGA. Thus the punctate juxtanuclear staining of full length PAM represents PAM in endosomes. Endoproteolytic processing of full length PAM-1 and PAM-2 resulted in the secretion of soluble PAM proteins; the secretion of these soluble PAM proteins was stimulus dependent. Although some of the truncated PAM protein was also processed and stored in AtT-20 cells, much of the expressed protein was redistributed to the plasma membrane. Soluble proteins not observed in large amounts in cells expressing full length PAM were released from the surface of cells expressing truncated PAM and little internalization of truncated integral membrane PAM was observed. Thus, the COOH-terminal domain of PAM contains information important for its trafficking within the regulated secretory pathway as well as information necessary for its retrieval from the cell surface.