Abstract. Mutational studies were previously carried out at the co site in intact cells (Micanovic, R., L. Gerber, J. Berger, K. Kodukula, and S. Udenfriend. 1990. Proc. Natl. Acad. Sci. USA. 87:157-161; Micanovic R., K. Kodukula, L. Gerber, and S. Udenfriend. 1990. Proc. Natl. Acad. Sci. USA: 87:7939-7943) and at the co + 1 and co + 2 sites in a cell-free system (Gerber, L., K. Kodukula, and S. Udenfriend. 1992. J. Biol. Chem. 267:12168-12173) of nascent proteins destined to be processed to a glycosylphosphatidylinositol (GPI)-anchored form. We have now mutated the co + 1 and co + 2 sites in placental alkaline phosphatase (PLAP) cDNA and transfected the wild-type and mutant cDNAs into COS 7 cells. Only glycine at the co + 2 site yielded enzymatically active GPI membrane-anchored PLAP in amounts comparable to the wild type (alanine). Serine was less active and threonine and valine yielded very low but significant activity. By contrast the co + 1 site was promiscuous, with only prollne being inactive. These and the previous studies indicate that the co and ~0 + 2 sites of a nascent protein are key determinants for recognition by COOH-terminal signal transamidase. Comparisons have been made to specific requirements for substitution at the -1, -3 sites of amino terminal signal peptides for recognition by NH2-terminal signal peptidase and the mechanisms of NH2 and COOH-terminal signaling are compared.