The human vasopressin V2 receptor belongs to the large family of G-protein-coupled receptors, which possess seven transmembrane helices, an extracellular N terminus and an intracellular C terminus. We have determined the sequence requirements of the V2 receptor for membrane insertion and correct topology for the inner membrane of Escherichia coli with the PhoA/LacZ gene fusion system. In addition, we have studied the signals for its membrane insertion and correct topology for the membrane of the endoplasmic reticulum of the authentic eucaryotic transport system. To this end, we have extended the PhoA/LacZ gene fusion system for the first time to eucaryotic cells, i.e. transiently transfected COS.M6 cells. Truncated V2 receptor sequences were fused to PhoA and LacZ and expressed in both E. coli and COS.M6 cells. Cells were fractionated, and LacZ/PhoA activity assays and immunoblots were performed. We show here that a V2 receptor fragment consisting of the N terminus, the first transmembrane segment and the first cytoplasmic loop (71 amino acids) provided sufficient information for membrane insertion and correct orientation (extracellular N terminus) in both procaryotic and eucaryotic cells. Our data differ substantially from those obtained for the human beta2-adrenergic receptor expressed in E. coli (Lacatena, R. M., Cellini, A., Scavizzi, F., and Tocchini-Valentini, G. P. (1994) Proc. Natl. Acad. Sci. U. S. A. 91, 10521-10525). To establish correct topology, the beta2-adrenergic receptor requires a larger receptor portion, including the three N-terminal transmembrane segments and/or parts of the second cytoplasmic loop. The present data show that the observations made for the beta2-adrenergic receptor cannot be applied to G-protein-coupled receptors generally.