Reduction of disulfide bonds is a key step in antigen processing both to allow the unfolding of protein antigens, increasing the access of proteolytic processing enzymes, and to expose free Cys residues within linear peptide epitopes recognized by T cells. We show here that reduction and alkylation of Ag (hen egg lysozyme and ribonuclease A) vastly increased their proteolysis (by specific enzymes or lysosomal fractions) and the production of specific immunogenic peptides that bound to class II MHC molecules recognized by T hybridoma cells. We also show that the lysosome is the vesicular compartment that mediates protein disulfide reduction. We coupled [125I]tyrosine to 131I-alpha 2-macroglobulin or [131I] transferrin via a reducible disulfide linker. Removal of [125I]tyrosine from the alpha 2-macroglobulin conjugate was initiated only after 15 to 20 min of uptake by macrophages, suggesting that reduction occurred late in the endocytic pathway. No reduction of transferrin conjugates was seen, indicating that early, recycling endosomes did not contain reducing activity. Subcellular fractionation showed that the disulfide bonds were reduced only in heavy density (lysosome) fractions and remained intact in fractions of light density (endosomes and plasma membrane). These results indicate the importance of lysosomes in the biochemical processing of protein Ag presented to T cells.