The current studies were carried out to examine the basis for the differences in the antigenic peptides generated from exogenous and endogenous forms of hen egg white lysozyme (HEL). The role of different intracellular compartments in the generation and binding of HEL peptides derived from two endogenous forms of HEL, either secreted (sHEL) or retained in the endoplasmic reticulum (ER, KDELHEL), presented by MHC class II molecules was examined and compared to exogenous HEL. Initially it was found that antigen-presenting cells bearing both intracellular forms of HEL generated and presented a number of IAk-restricted HEL epitopes to T cell hybridomas, although sHEL was processed more efficiently than KDEL-HEL. There were differences, however, for some determinants between endogenous and exogenous HEL. At equivalent antigen-presenting efficiencies, endogenous HEL-bearing cells displayed a lower surface density of IAk-bound HEL-52-61-related peptides than cells pulsed with exogenous HEL, as detected by a specific monoclonal antibody. Neither endogenous HEL degradation nor peptide binding to MHC class II molecules occurred in the ER. Processing of sHEL and KDELHEL appears to take place either in a post-trans-Golgi network acidic compartment or in the cytosol, whereas peptide binding to MHC class II molecules occurs in endocytic compartments. Furthermore, the peptides generated were derived from an endogenous source rather than from secreted and re-endocytosed HEL. Thus, processing of endogenous HEL is from a different pool than exogenous HEL and occurs in different compartments.