Tumor necrosis factor (TNF) is a cytokine that is produced by immune cells in response to bacterial and viral stimuli and plays important roles in various inflammatory diseases. TNF is produced as a membrane-bound precursor, which is then cleaved to release soluble mature protein. We expressed murine pro-TNF in Saccharomyces cerevisiae and examined processing and cellular localization of the recombinant protein. Yeast cells were transformed with an expression construct carrying the pro-TNF gene under the control of alcohol dehydrogenase promoter. Immunoblotting analysis of cell homogenate revealed expression of 26 kD pro-TNF in transformed cells. Upon centrifugation, pro-TNF transformed cells fractionated into the membrane/particulate. In a clone that expresses a high level of pro-TNF, mature 17 kD TNF was detected in the culture medium, although the amount was far smaller than that of cell-associated pro-TNF. Flow cytometric analysis of yeast spheroplasts demonstrated the presence of TNF on the cell surface. Our results show that pro-TNF expressed in yeast mainly resides in the cellular membrane with an orientation similar to that of pro-TNF produced in mammalian cells. Our data suggest that the transformed yeast cells can be used for the genetic analysis of pro-TNF processing machinery in immune cells.