Yeast pheromone a-factor is a 13-amino acid peptide hormone that is synthesized as a part of a larger precursor, prepro-$alpha$-factor, consisting of a signal peptide and a proregion of 64 amino acids. The carboxy-terminal half of the precursor contains four tandem copies of mature $alpha$-factor. To investigate the molecular basis of intracellular sorting, proteolytic processing, and storage of the peptide hormone, yeast prepro-$alpha$-factor precursors were heterologously expressed in rat pituitary $GH_3 cells. When cells harboring the precursor were metabolically labeled, a species of approximately 27 kD appeared inside the cells. Digestion with peptide: N-glycosidase F (PNG-F) shifted the molecular mass to a 19 kD, suggesting that the 27 kD protein was the glycosylated form as in yeast cells. The nascent polypeptide is efficiently targeted to the ER in the $GH_3 cells, where it undergoes cleavage of its signal peptide and core glycosylation to generate glycosylated pro-a-factor. To look at the post ER intracellular processing, the pulse-labelled cells were chased up to 2 hrs. The nascent propeptides disappeared from the cells at a half life of 30 min and only 10-25% of the newly synthesized, unprocessed precursors were stored intracellularly after the 2 h chase. However, about 20% of the pulse-labeled pro-$alpha$-factor precursors were secreted into the medium in the pro-hormone form. With increasing chase time, the intracellular level of propeptide decreased, but the amount of secreted propeptide could not account for the disappearance of intracellular propeptide completely. This disappearance was insensitive to lysosomotropic agents, but was inhibited at $16^{circ}C or 20^{circ}C$, suggesting that the turnover of the precursors was not occurring in the secretory pathway to trans Golgi network (TGN) or dependent on acidic compartments. From these results, it is concluded that a pan of these heterologous precursors may be processed at its paired dibasic sites by prohormone processing enzymes located in TGN/secretpry vesicles producing small peptides, and that the residual unprocessed precursors may be secreted into the medium rather than degraded intracellularly.