Calreticulin is considered a resident protein of the endoplasmic reticulum (ER), where it participates in protein folding and calcium homeostasis. Shaffer et al. show that in an in vitro translation and translocation system (containing rough microsomes), a small but detectable fraction of mature processed calreticulin, but not prolactin, appears not to be translocated into the microsomes. This difference in localization of prolactin and calreticulin resulted from differences in the efficiency of translocation into the microsomes, which reflected differences in the signal sequences of the two proteins. Exchange of the signal sequences resulted in complete translocation of calreticulun with the prolactin signal sequence and incomplete translocation of prolactin with the calreticulin signal sequence. Five percent to 20% of the calreticulin had a cytoplasmic localization when calreticulin was overexpressed in transfected cells, depending on the cells and conditions. Calreticulin functions as an inhibitor of transcriptional activation by steroid hormone receptors. Expression of wild-type calreticulin, which produces a small fraction of cytosolic Crt, or the Prl-Crt fusion protein, which is essentially all translocated into the ER, in Crt —/— mouse embryo fibroblasts (MEFs) allowed the effect of cytosolic calreticulin on a glucocorticoid reporter gene to be assessed. Cells with wild-type calreticulin exhibited substantially less reporter gene expression than cells expressing the fully translocated Prl-Crt protein. Thus, inefficient translocation and the production of a small, but functionally important, population of cytosolic calreticulin appears to mediate an inhibitory effect on glucocorticoid receptor signaling. K. L. Shaffer, A. Sharma, E. L. Snapp, R. S. Hegde, Regulation of protein compartmentalization expands the diversity of protein function. Dev. Cell 9 , 545-554 (2005). [PubMed]