The sec18 and sec23 secretory mutants of Saccharomyces cerevisiae have previously been shown to exhibit temperature-conditional defects in protein transport from the ER to the Golgi complex (Novick, P., S. Ferro, and R. Schekman, 1981. Cell. 25:461-469). We have found that the Sec18 and Sec23 protein functions are rapidly inactivated upon shifting mutant cells to the nonpermissive temperature (less than 1 min). This has permitted an analysis of the potential role these SEC gene products play in transport events distal to the ER. The sec-dependent transport of alpha-factor (alpha f) and carboxypeptidase Y (CPY) biosynthetic intermediates present throughout the secretory pathway was monitored in temperature shift experiments. We found that Sec18p/NSF function was required sequentially for protein transport from the ER to the Golgi complex, through multiple Golgi compartments and from the Golgi complex to the cell surface. In contrast, Sec23p function was required in the Golgi complex, but only for transport of alpha f out of an early compartment. Together, these studies define at least three functionally distinct Golgi compartments in yeast. From cis to trans these compartments contain: (a) An alpha 1----6 mannosyltransferase; (b) an alpha 1----3 mannosyltransferase; and (c) the Kex2 endopeptidase. Surprisingly, we also found that a pool of Golgi-modified CPY (p2 CPY) located in a compartment distal to the alpha 1----3 mannosyltransferase does not require Sec18p function for final delivery to the vacuole. This compartment appears to be equivalent to the Kex2 compartment as we show that a novel vacuolar CPY-alpha f-invertase fusion protein undergoes efficient Kex2-dependent cleavage resulting in the secretion of invertase. We propose that this Kex2 compartment is the site in which vacuolar proteins are sorted from proteins destined to be secreted.