We have studied the relationship between folding and secretion competence of hsp150-beta lactamase fusion proteins in Saccharomyces cerevisiae. hsp150 is a secretory protein of yeast, and beta-lactamase was chosen, since its folding can be monitored by assaying its enzymatic activity. The hsp150 pre-pro-protein consists of a signal peptide, subunit I, a repetitive region, and a unique C terminus. Fusion of beta-lactamase to the C terminus of hsp150 produced Cla-bla protein, which was secretion-competent but inactive. The Pst-bla protein, where beta-lactamase was fused to subunit I, was also inactive and mostly secreted, but part of it remained in the pre-Golgi compartment. When beta-lactamase was fused to the C-terminus of the repetitive region, the fusion protein (Kpn-bla) was translocated to the endoplasmic reticulum, acquired disulfide bonds, and adopted an enzymatically active conformation. Kpn-bla was secreted to the medium without decrease of specific activity or retention in the cell. Folding of Kpn-bla to an active and transport-competent form required co-translational disulfide formation, since treatment of cells with dithiothreitol resulted in endoplasmic reticulum-retained inactive Kpn-bla. When dithiothreitol was removed, Kpn-bla resumed transport competence but remained inactive. Reduction of prefolded Kpn-bla did not inhibit enzymatic activity or transport. The repetitive hsp150 carrier may have use in heterologous protein production by conferring secretion competence to foreign proteins in yeast.