We studied the functional consequences of targeting class II molecules to either the cell surface or to endocytic structures by expressing HLA-DR1 in human kidney cells in the presence or absence of different forms of the invariant chain (Ii). Transfectants expressing class II molecules in the absence of Ii present influenza virus efficiently and co-expression of full length Ii does not further increase antigen presentation. Chimeric Ii containing the cytoplasmic domain of the transferrin receptor (Tfr-Ii) delivers class II molecules associated with Tfr-Ii to endosomal compartments, but this does not result in efficient antigen presentation. When class II molecules are targeted to the cell surface by Ii lacking either 15 (delta 15Ii) or 23 (delta 23Ii) amino acids from the cytoplasmic domain, a fraction of free class II molecules is also observed. Whereas delta 15Ii did not affect antigen presentation by class II molecules, delta 23Ii inhibited, but did not abrogate, the response. We show that class II molecules expressed in the presence of delta 23Ii can be internalized, followed by degradation of delta 23Ii and return of free class II alpha beta heterodimers to the cell surface. A fraction of the resulting free class II molecules is sodium dodecyl sulfate stable, indicating that internalization and reappearance of class II molecules at the cell surface can be an alternative route for antigen presentation. In all transfectants, class II molecules were found in endocytic compartments that labeled for CD63 and resembled the multilaminar MIIC compartments found in B cell lines. Ii is not required for endosomal targeting of class II molecules. The number of class II molecules observed in the multilaminar compartments correlates with the efficiency of antigen presentation.