Somatostatin (SRIF) is a peptide hormone that is synthesized as part of a larger precursor, prepro-SRIF, consisting of a signal peptide and a proregion of 80-90 amino acids. The mature hormone exists as two different bioactive species. In addition to the most common form, which is a 14-residue peptide, there is also a 14-amino acid NH2-terminally extended form of the tetradecapeptide, SRIF-28. In mammals a single prepro-SRIF molecule undergoes tissue-specific processing to generate the mature hormone, whereas in some species of fish separate genes encode two distinct but homologous precursors, prepro-SRIF-I and -II, that give rise to SRIF-14 and -28, respectively. To investigate the molecular basis for differential processing of the prohormones, we have expressed their cDNAs in heterologous cells. Previously, we demonstrated that prepro-SRIF-I was efficiently and accurately processed in rat pituitary growth hormone (GH3) cells to generate the same hormone as synthesized in pancreatic islet D-cells, namely SRIF-14 (Stoller, T., and Shields, D. (1989) J. Biol. Chem. 264, 6922-6928). We have now compared the proteolytic processing of pro-SRIF-II to that of pro-SRIF-I in these cells. In contrast to pro-SRIF-I, pro-SRIF-II was neither processed nor secreted. Instead, greater than 70% of the precursor was degraded intracellularly in a post-trans Golgi network compartment which was inhibited by weak bases. Brefeldin A treatment prevented degradation, suggesting that turnover of the remaining pro-SRIF-II occurred after exit from the endoplasmic reticulum/intermediate compartment and prior to arrival at the trans Golgi network. The intracellular degradation of the precursor was unexpected, since heterologous cells which do not cleave prohormones generally secrete the unprocessed precursor. We speculate that unique structural domains within each precursor are recognized by the sorting apparatus in GH3 cells, thereby targeting the molecules to different intracellular organelles.