Autoantibodies to a 64-kD protein and a 40-kD tryptic fragment from pancreatic islets have been detected at high frequency in the sera of patients with insulin-dependent diabetes mellitus (IDDM). IA-2, a newly isolated transmembrane protein tyrosine phosphatase, is a major islet cell autoantigen in IDDM and the precursor of a 40-kD tryptic fragment. To express large quantities of recombinant IA-2 protein and analyse post-translational modifications we expressed full-length human IA-2 in baculovirus-infected Sf-9 cells. IA-2 expression was analysed by Western blot and by immunoprecipitation of 35S-methionine-radiolabelled proteins with rabbit antisera or IDDM sera. A 120-kD IA-2 protein was detected during the early, but not the late, phase of the infection. Pulse-chase experiments showed that the 120-kD protein was processed into fragments of 64 kD and smaller fragments of approximately 50 kD, 38 kD and 32 kD. The 64-kD fragment appeared as a doublet. Tunicamycin and PNGase F treatment down-shifted the 120-kD protein and the 64-kD doublet into lower molecular weight bands, suggesting that both were glycosylated. Trypsin treatment converted the 120-kD protein and the 64-kD doublet into a 40-kD fragment. Baculovirus-expressed IA-2 was as sensitive or slightly more sensitive than in vitro translated IA-2 in detecting autoantibodies to IA-2: 66% of sera from newly diagnosed IDDM patients reacted with baculovirus-expressed IA-2 compared with 59% of the same sera which reacted with in vitro translated IA-2. It is concluded that baculovirus-expressed IA-2 is a good source of autoantigen and that a number of lower molecular weight fragments with which IDDM autoantibodies react are derived from the 120-kD full-length IA-2 molecule.