Resident proteins of the ER lumen carry a specific tetrapeptide signal (KDEL or HDEL) that prevents their secretion. We have previously described the isolation of yeast mutants that fail to retain such resident proteins within the cell. Here we describe ERD2, a gene required for retention. It encodes a 26 kd integral membrane protein whose abundance determines the efficiency and capacity of the retention system. Reduced expression of ERD2 leads to secretion of proteins bearing the HDEL signal, whereas overexpression of ERD2 improves retention both in wild-type cells and in other mutants. These results are consistent with other evidence that ERD2 encodes the HDEL receptor (see accompanying paper). The gene is also required, perhaps indirectly, for normal protein transport through the Golgi, and hence for growth. We discuss possible roles for ERD2 in the secretory pathway.