N-terminal signal sequences mediate endoplasmic reticulum (ER) targeting and insertion of nascent secretory and membrane proteins and are, in most cases, cleaved off by signal peptidase. The mouse mammary tumor virus envelope protein and its alternative splice variant Rem have an unusually long signal sequence, which contains a nuclear localization signal. Although the envelope protein is targeted to the ER, inserted, and glycosylated, Rem has been described as a nuclear protein. Rem as well as a truncated version identical to the cleaved signal sequence have been shown to function as nuclear export factors for intron-containing transcripts. Using transiently transfected cells, we found that Rem is targeted to the ER, where the C-terminal portion is translocated and glycosylated. The signal sequence is cleaved off and accumulates in nucleoli. In a cell-free in vitro system, the generation of the Rem signal peptide depends on the presence of microsomal membranes. In vitro and in cells, the signal peptide initially accumulates in the membrane and is subsequently released into the cytosol. This release does not depend on processing by signal peptide peptidase, an intramembrane cleaving protease that can mediate the liberation of signal peptide fragments from the ER membrane. Our study suggests a novel pathway by which a signal peptide can be released from the ER membrane to fulfill a post-targeting function in a different compartment.