The mammalian small molecular weight GTPase Rab7 (Ypt7 in yeast) has been implicated in regulating membrane traffic at postinternalization steps along the endosomal pathway. A cDNA encoding a protein 85% identical at the amino acid level to mammalian Rab7 has been cloned from Dictyostelium discoideum. Subcellular fractionation and immunofluorescence microscopy indicated that Rab7 was enriched in lysosomes, postlysosomes, and maturing phagosomes. Cell lines were generated that overexposed Rab7 wild-type (WT), Rab7 Q67L (constitutively active form), and Rab7 T22N (dominant negative form) proteins. The Rab7 T22N cell line internalized fluid phase markers and latex beads (phagocytosis) at one-third the rate of control cells, whereas Rab7 WT and Rab7 Q67L cell lines were normal in uptake rates but exocytosed fluid phase faster than control cells. In contrast, fluid phase markers resided in acidic compartments for longer periods of time and were more slowly exocytosed from Rab7 T22N cells as compared with control cells. Light microscopy indicated that Rab7-expressing cell lines contained morphologically altered endosomal compartments. Compared with control cells, Rab7 WT- and Rab7 Q67L-expressing cells contained a reduced number of vesicles, the size of postlysosomes (> 2.5 microns) and an increased number of smaller vesicles, many of which were nonacidic; in control cells, > 90% of the smaller vesicles were acidic. In contrast, Rab7 T22N cells contained an increased proportion of large acidic vesicles relative to nonacidic vesicles. Radiolabel pulse-chase experiments indicated that all of the cell lines processed and targeted lysosomal alpha-mannosidase normally, indicating the lack of a significant role for Rab7 in the targeting pathway; however, retention of mature lysosomal hydrolases was affected in Rab7 WT and Rab7 T22N cell lines. Contrary to the results observed for the fluid phase efflux experiments, Rab7 T22N cells oversecreted alpha-mannosidase, whereas Rab7 WT cells retained this hydrolase as compared with control cells. These data support a model that Rab7 may regulate retrograde transport of lysosomal enzymes and the V-type H(+)-ATPase from postlysosomes to lysosomes coupled with the efficient release of fluid phase from cells.