To investigate the mechanisms of ER-associated protein degradation (ERAD), this process was reconstituted in vitro. Established procedures for post-translational translocation of radiolabeled prepro-alpha factor into isolated yeast microsomes were modified to inhibit glycosylation and to include a posttranslocation "chase" incubation period to monitor degradation. Glycosylation was inhibited with a glyco-acceptor peptide to compete for core carbohydrates, or by using a radio-labeled alpha factor precursor that had been genetically engineered to eliminate all three glycosylation sites. Inhibition of glycosylation led to the production of unglycosylated pro-alpha factor (p alpha F), a processed form of the alpha factor precursor shown to be a substrate of ERAD in vivo. With this system, both glycosylated and unglycosylated forms of pro-alpha factor were stable throughout a 90-min chase incubation. However, the addition of cytosol to the chase incubation reaction induced a selective and rapid degradation of p alpha F. These results directly reflect the behavior of alpha factor precursor in vivo; i.e., p alpha F is a substrate for ERAD, while glycosylated pro-alpha factor is not. Heat inactivation and trypsin treatment of cytosol, as well as addition of ATP gamma S to the chase incubations, led to a stabilization of p alpha F. ERAD was observed in sec12 microsomes, indicating that export of p alpha F via transport vesicles was not required. Furthermore, p alpha F but not glycosylated pro-alpha factor was found in the supernatant of the chase incubation reactions, suggesting a specific transport system for this ERAD substrate. Finally, the degradation of p alpha F was inhibited when microsomes from a yeast strain containing a disrupted calnexin gene were examined. Together, these results indicate that cytosolic protein factor(s), ATP hydrolysis, and calnexin are required for ER-associated protein degradation in yeast, and suggest the cytosol as the site for degradation.