The biological control of posttranslational maturation and compartmentalization reactions that operate upon proteins during transport to their final cellular destinations is crucial for normal cellular function. Using the expression of mouse mammary tumor virus (MMTV) glycoproteins as sensitive probes in the viral-infected rat hepatoma cell line M1.54, we have discovered and documented a novel glucocorticoid-regulated trafficking pathway that controls the cell surface localization of MMTV glycoproteins. One complement-selected derivative of M1.54 cells, CR4, failed to compartmentalize cell surface MMTV glycoproteins in the presence of dexamethasone. To test genetically if this glycoprotein trafficking pathway is mediated by cellular or viral gene products, CR4 cells were fused with uninfected Fu5 rat hepatoma cells. Indirect immunofluorescence of CR4 X Fu5 heterokaryons revealed that Fu5 complemented the defect in CR4 only after exposure to 1 microM dexamethasone. The glucocorticoid inhibition of Fu5 proliferation was exploited to recover the receptor-deficient uninfected derivative EDR3 that expressed a 100-fold lower level of [3H]dexamethasone binding activity. Analysis of CR4 X EDR3 cell fusions by indirect immunofluorescence revealed that EDR4 cells complemented CR4 in a dexamethasone-dependent manner, suggesting that EDR3 supplied a functinal trafficking component while CR4 provided a functional glucocorticoid receptor to the heterokaryons. Taken together, our results demonstrate that cellular-encoded glucocorticoid-inducible components mediate the regulated trafficking of cell surface MMTV glycoproteins.