The C-terminal region of the chaperone-like pro-sequence (py) of yeast carboxypeptidase Y (CPY) is suggested to be crucial for the folding of mature CPY. In order to study the influence of hydrophobic residues in this domain, a set of mutations have been introduced in py. Unexpectedly, only small amounts of CPY precursors are expressed when Leu108, at the C-terminal end of py, is substituted for polar residues Lys, Arg or Asp. In contrast, substitution with hydrophobic residues Val, Ile or Ala permit normal expression. Interestingly, the poorly expressed molecules are coreglycosylated, implying that they have failed to leave the endoplasmic reticulum (ER). The ER-retained molecules caused an induction in the levels of BiP, signifying that polar substitutions at position 108 of pre-py-CPY induce misfolding. Quite surprisingly, a reporter gene, linked to concatamerized unfolded-protein-response elements, reveals that py-mediated misfolding of CPY is not really identical in all mutants. This shows that a simple transcriptional assay can assess the subtleties of pro-sequence mediated protein folding in an eukaryotic cell.