As an approach to understand the molecular mechanisms of endoplasmic reticulum (ER) protein sorting, we have isolated yeast rer mutants that mislocalize a Sec12-Mfalpha1p fusion protein from the ER to later compartments of the secretory pathway (S. Nishikawa and A. Nakano, Proc. Natl. Acad. Sci. USA 90:8179-8183, 1993). The temperature-sensitive rer2 mutant mislocalizes different types of ER membrane proteins, suggesting that RER2 is involved in correct localization of ER proteins in general. The rer2 mutant shows several other characteristic phenotypes: slow growth, defects in N and O glycosylation, sensitivity to hygromycin B, and abnormal accumulation of membranes, including the ER and the Golgi membranes. RER2 and SRT1, a gene whose overexpression suppresses rer2, encode novel proteins similar to each other, and their double disruption is lethal. RER2 homologues are found not only in eukaryotes but also in many prokaryote species and thus constitute a large gene family which has been well conserved during evolution. Taking a hint from the phenotype of newly established mutants of the Rer2p homologue of Escherichia coli, we discovered that the rer2 mutant is deficient in the activity of cis-prenyltransferase, a key enzyme of dolichol synthesis. This and other lines of evidence let us conclude that members of the RER2 family of genes encode cis-prenyltransferase itself. The difference in phenotypes between the rer2 mutant and previously obtained glycosylation mutants suggests a novel, as-yet-unknown role of dolichol.