K1 killer strains of Saccharomyces cerevisiae secrete a polypeptide toxin to which they are themselves immune. The alpha and beta components of toxin comprise residues 45-147 and 234-316 of the 316-residue K1 preprotoxin. The intervening 86-residue segment is called gamma. A 26-residue signal peptide is removed on entry into the endoplasmic reticulum. The Kex2 protease excises the toxin components from the 290-residue glycosylated protoxin in a late Golgi compartment. Expression of a cDNA copy of the preprotoxin gene confers the complete K1 killer phenotype on sensitive cells. We now show that expression of immunity requires the alpha component and the N-terminal 31 residues of gamma. An additional C-terminal extension, either eight residues of gamma or three of four unrelated peptides, is also required. Expression of preprotoxin terminating at the alpha C-terminus, or lacking the gamma N-terminal half of gamma causes profound but reversible growth inhibition. Inhibition is suppressed in cis by the same 31 residues of gamma required for immunity to exocellular toxin in trans, but not by the presence of beta. Both immunity and growth inhibition are alleviated by insertions in alpha that inactivate toxin. Inhibition is not suppressed by kex2, chc1 or kre1 mutations, by growth at higher pH or temperature, or by normal K1 immunity. Inhibition, therefore, probably does not involve processing of the alpha toxin component at its N-terminus or release from the cell and binding to glucan receptors. Some insertion and substitution mutations in gamma severely reduce toxin secretion without affecting immunity. They are presumed to affect protoxin folding in the endoplasmic reticulum and translocation to the Golgi.