A number of eukaryotic transcription factors are held in a latent state by being embedded in, or tethered to, cellular membranes. Mga2p of Saccharomyces cerevisiae is an endoplasmic reticulum (ER)-localized transcription factor that plays an overlapping role with homologous Spt23p in upregulating expression of OLE1, a gene required for the synthesis of essential oleic acid. Previous studies have documented that proteasome-dependent processing of ER bound 120 kDa Mga2p and Spt23p proteins generates transcriptionally competent 90 kDa polypeptides. In the case of Spt23p90, it is held at the membrane prior to release via a self-interaction with the unprocessed Spt23p120 anchor. It is currently thought that the highly conserved Rsp5p ubiquitin ligase provides the signal for partial degradation of both proteins. Cells lacking Rsp5p function require oleic acid for growth, and Spt23p processing is suppressed in rsp5 Delta cells and in wild-type RSP5 cells upon expression of Rsp5p dominant-negative mutants. We report here that Rsp5p is dispensable for Mga2p90 generation but not for release of the processed product from the ER. In addition, we demonstrate that polyubiquitinated Mga2p120 accumulates in cells lacking Npl4p or proteasome function and Rsp5p is required for Mga2p120 polyubiquitination. Finally, we provide evidence that Mga2p90 and Mga2p120 dimerize and that Rsp5p binds heterodimeric Mga2p complexes both in vitro and in vivo. In light of these experiments, we propose that Rsp5p facilitates Mga2p90 release from the ER by promoting polyubiquitination and Npl4p-proteasome-mediated degradation of the interacting Mga2p120 ER bound anchor.