Infection by human CMV induces expression of the cellular MHC class I-related chain A (MICA) and chain B (MICB) surface proteins, which function as ligands for the activating NKG2D receptor. Engagement of NKG2D triggers NK cells and costimulates Ag-specific effector CD8 alphabeta T cells. The potency of MHC class I-related chain-NKG2D in stimulating these anti-viral immune responses may be countered by a CMV-encoded transmembrane glycoprotein, UL16, which specifically binds MICB as well as two of the UL16-binding proteins that are ligands of NKG2D. However, the function and significance of these interactions are undefined. Using a stably transfected B cell line, we show that expression of UL16 results in loss of surface MICB. This effect is caused by the failure of newly synthesized MICB to mature and transit the secretory pathway due to physical association with UL16. The intracellular retention of these protein complexes is mediated by a tyrosine-based motif in the cytoplasmic tail sequence of UL16, which determines localization to or retrieval from the trans-Golgi network. Deletion of this motif restores surface expression of MICB, whereas UL16 may be redirected to endosomal compartments. Predictably, the retention of MICB abrogates the stimulatory function of NKG2D. These results suggest a potential mechanism of viral immune evasion. However, this activity remains to be confirmed with CMV-infected fibroblasts or endothelial cells, in particular because MICB is normally coexpressed with MICA, which is not retained by UL16.