Gpi7 was isolated by screening for mutants defective in the surface expression of glycosylphosphatidylinositol (GPI) proteins. Gpi7 mutants are deficient in YJL062w, herein named GPI7. GPI7 is not essential, but its deletion renders cells hypersensitive to Calcofluor White, indicating cell wall fragility. Several aspects of GPI biosynthesis are disturbed in Deltagpi7. The extent of anchor remodeling, i.e. replacement of the primary lipid moiety of GPI anchors by ceramide, is significantly reduced, and the transport of GPI proteins to the Golgi is delayed. Gpi7p is a highly glycosylated integral membrane protein with 9-11 predicted transmembrane domains in the C-terminal part and a large, hydrophilic N-terminal ectodomain. The bulk of Gpi7p is located at the plasma membrane, but a small amount is found in the endoplasmic reticulum. GPI7 has homologues in Saccharomyces cerevisiae, Caenorhabditis elegans, and man, but the precise biochemical function of this protein family is unknown. Based on the analysis of M4, an abnormal GPI lipid accumulating in gpi7, we propose that Gpi7p adds a side chain onto the GPI core structure. Indeed, when compared with complete GPI lipids, M4 lacks a previously unrecognized phosphodiester-linked side chain, possibly an ethanolamine phosphate. Gpi7p contains significant homology with phosphodiesterases suggesting that Gpi7p itself is the transferase adding a side chain to the alpha1,6-linked mannose of the GPI core structure.