The signal peptide plays a key role in targeting and membrane insertion of secretory and membrane proteins in both prokaryotes and eukaryotes. In E. coli, recombinant proteins can be targeted to the periplasmic space by fusing naturally occurring signal sequences to their N-terminus. The model protein thioredoxin was fused at its N-terminus with malE and pelB signal sequences. While WT and the pelB fusion are soluble when expressed, the malE fusion was targeted to inclusion bodies and was refolded in vitro to yield a monomeric product with identical secondary structure to WT thioredoxin. The purified recombinant proteins were studied with respect to their thermodynamic stability, aggregation propensity and activity, and compared with wild type thioredoxin, without a signal sequence. The presence of signal sequences leads to thermodynamic destabilization, reduces the activity and increases the aggregation propensity, with malE having much larger effects than pelB. These studies show that besides acting as address labels, signal sequences can modulate protein stability and aggregation in a sequence dependent manner.