Hereditary hemochromatosis (HH) is the most common autosomal recessive disorder known in humans. A candidate gene for HH called HFE has recently been cloned that encodes a novel member of the major histocompatibility complex class I family. Most HH patients are homozygous for a Cys-282-->Tyr (C282Y) mutation in HFE gene, which has been shown to disrupt interaction with beta2-microglobulin; a second mutation, His-63-->Asp (H63D), is enriched in HH patients who are heterozygous for C282Y mutation. The aims of this study were to determine the effects of the C282Y and H63D mutations on the cellular trafficking and degradation of the HFE protein in transfected COS-7 cells. The results indicate that, while the wild-type and H63D HFE proteins associate with beta2-microglobulin and are expressed on the cell surface of COS-7 cells, these capabilities are lost by the C282Y HFE protein. We present biochemical and immunofluorescence data that indicate that the C282Y mutant protein: (i) is retained in the endoplasmic reticulum and middle Golgi compartment, (ii) fails to undergo late Golgi processing, and (iii) is subject to accelerated degradation. The block in intracellular transport, accelerated turnover, and failure of the C282Y protein to be presented normally on the cell surface provide a possible basis for impaired function of this mutant protein in HH.