Sialidase (neuraminidase), encoded by the neu-1 gene in the major histocompatibility complex locus catalyzes the intralysosomal degradation of sialylated glycoconjugates. Inherited deficiency of sialidase results in sialidosis or galactosialidosis, both severe metabolic disorders associated with lysosomal storage of oligosaccharides and glycopeptides. Sialidase also plays an important role in cellular signaling and is specifically required for the production of cytokine interleukin-4 by activated T lymphocytes. In these cells, neu-1-encoded sialidase activity is increased on the cell surface, suggesting that a specific mechanism regulates sorting of this enzyme to the plasma membrane. We investigated that mechanism by first showing that sialidase contains the internalization signal found in lysosomal membrane proteins targeted to endosomes via clathrin-coated pits. The signal consists of a C-terminal tetrapeptide (412)YGTL(415), with Tyr(412) and Leu(415) essential for endocytosis of the enzyme. We further demonstrated that redistribution of sialidase from lysosomes to the cell surface of activated lymphocytes is accompanied by increased reactivity of the enzyme with anti-phosphotyrosine antibodies. We speculate that phosphorylation of Tyr(412) results in inhibition of sialidase internalization in activated lymphocytes.