Electron microscopy was used to evaluate the function and formation of dense core lysosomes. Lysosomes were preloaded with bovine serum albumin (BSA)-gold conjugates by fluid phase endocytosis using a pulse-chase protocol. The gold particles present in dense core lysosomes and late endosomes were flocculated, consistent with proteolytic degradation of the BSA. A second pulse of BSA-gold also accumulated in the pre-loaded dense core lysosomes at 37 degrees C, but accumulation was reversibly blocked by incubation at 20 degrees C. Time course experiments indicated that mixing of the two BSA-gold conjugates initially occurred upon fusion of mannose 6-phosphate receptor-positive/lysosomal glycoprotein-positive late endosomes with dense core lysosomes. Treatment for 5 hours with wortmannin, a phosphatidyl inositide 3-kinase inhibitor, caused a reduction in number of dense core lysosomes preloaded with BSA-gold and prevented a second pulse of BSA-gold accumulating in them. After wortmannin treatment the two BSA-gold conjugates were mixed in swollen late endosomal structures. Incubation of NRK cells with 0.03 M sucrose resulted in the formation of swollen sucrosomes which were morphologically distinct from preloaded dense core lysosomes and were identified as late endosomes and hybrid endosome-lysosome structures. Subsequent endocytosis of invertase resulted in digestion of the sucrose and re-formation of dense core lysosomes. These observations suggest that dense core lysosomes are biologically active storage granules of lysosomal proteases which can fuse with late endosomes and be re-formed from the resultant hybrid organelles prior to subsequent cycles of fusion and re-formation.