Peripheral myelin protein 22 (PMP22) is an integral membrane protein that is essential for the normal formation and maintenance of peripheral myelin. Duplications, deletions, or mutations in the PMP22 gene account for a set of dominantly inherited peripheral neuropathies. The heterozygous Trembler-J (TrJ) genotype in mice is similar genetically to a Charcot-Marie-Tooth disease type 1A pedigree in humans, whereas the homozygous TrJ condition leads to the most severe form of PMP22-associated neuropathies. To characterize the consequences of the TrJ mutation, we labeled wild-type (wt-) and TrJ-PMP22 in the third loop of the protein with different epitope tags and expressed them separately or together in COS7 cells and primary Schwann cells. Here we show that the transport of the mutant TrJ-PMP22 is interrupted in the intermediate compartment, preventing its insertion into the plasma membrane and affecting the morphology of the endoplasmic reticulum. In addition, TrJ-PMP22 forms a heterodimer with the wt-PMP22. This interaction causes a fraction of the wt-PMP22 to be retained with TrJ-PMP22 in the intermediate compartment of COS7 and Schwann cells. The relative stability of a wt-mutant PMP22 heterodimer as compared with the wt-wt PMP22 homodimer may determine whether a particular mutation is semidominant or dominant. The neuropathy itself appears to result both from decreased trafficking of wt-PMP22 to the plasma membrane and from a toxic gain of function via the accumulation of wt- and TrJ-PMP22 in the intermediate compartment.