Rat surfactant protein C (SP-C) is synthesized as a 194-amino acid propeptide (SP-C-(1-194)) that is directed to the distal secretory pathway and proteolytically processed as an integral membrane protein to yield its mature form. We had shown previously that trafficking of proSP-C is mediated both by a signal anchor domain contained within the mature SP-C sequence and by a targeting domain in the NH(2)-flanking propeptide. Based on evidence from other integral membrane proteins, we hypothesized that proSP-C targeting is effected by oligomerization of proSP-C monomers. To evaluate this in vitro, cDNA constructs encoding for either wild type proSP-C (pcDNA3/SP-C-(1-194)) or heterologous fusion proteins containing green fluorescent protein (EGFP) linked to SP-C-(1-194) (EGFP/SP-C-(1-194)), to mutant proSP-C lacking the NH(2) targeting domain (EGFP/SP-C-(24-194)), or to mature SP-C alone (EGFP/SP-C-(24-58)) were produced. In transfected A549 cells, fluorescence microscopy revealed that pcDNA3/SP-C-(1-194) and EGFP/SP-C-(1-194) were each expressed in CD63 (+), EEA1 (-) cytoplasmic vesicles. Expression of EGFP/SP-C-(24-194) or EGFP/SP-C-(24-58) resulted in translocation but retention in early compartments. When co-transfected with pcDNA3/SP-C-(1-194), both EGFP/SP-C-(24-194) and EGFP/SP-C-(24-58) were directed to CD63 (+) vesicles that also contained SP-C-(1-194). In contrast, trafficking of a folding mutant that forms juxtanuclear aggregates, EGFP/SP-C(C122/186G), was not corrected by cotransfection with pcDNA3/SP-C-(1-194). Chemical cross-linking studies of transfected cell lysates with bismaleimidohexane produced multimeric forms of both EGFP/SP-C-(1-194) and EGFP/SP-C-(24-58). These results indicate that sorting involves oligomeric association of proSP-C monomers mediated by the mature SP-C domain. Heteromeric assembly allows wild type proSP-C to facilitate trafficking of SP-C mutants with intact transmembrane domains but lacking targeting signals. We speculate that heterotypic oligomerization of wild type with SP-C folding mutants produces a dominant negative thus contributing to the pathology of chronic lung disease associated with patients heterozygous for mutant SP-C alleles.