An insulin-containing fusion protein (ICFP, encoding the yeast prepro-alpha factor leader peptide fused via a lysine-arginine cleavage site to a single chain insulin) has been expressed in Saccharomyces cerevisiae where it is inefficiently secreted. Single gene disruptions have been identified that cause enhanced immunoreactive insulin secretion (eis). Five out of six eis mutants prove to be vacuolar protein sorting (vps)8, vps35, vps13, vps4, and vps36, which affect Golgi<-->endosome trafficking. Indeed, in wild-type yeast insulin is ultimately delivered to the vacuole, whereas vps mutants secrete primarily unprocessed ICFP. Disruption of KEX2, which blocks intracellular processing to insulin, quantitatively reroutes ICFP to the cell surface, whereas loss of the Vps10p sorting receptor is without effect. Secretion of unprocessed ICFP is not based on a dominant secretion signal in the alpha-leader peptide. Although insulin sorting mediated by Kex2p is saturable, Kex2p functions not as a sorting receptor but as a protease: replacement of Kex2p by truncated secretory Kex2p (which travels from Golgi to cell surface) still causes endoproteolytic processing and intracellular insulin retention. Endoproteolysis promotes a change in insulin's biophysical properties. B5His residues normally participate in multimeric insulin packing; a point mutation at this position permits ICFP processing but causes the majority of processed insulin to be secreted. The data argue that multimeric assembly consequent to endoproteolytic maturation regulates insulin sorting in the secretory pathway.