The ubiquitin E3 ligase gene related to anergy in lymphocytes (GRAIL) (Rnf128) is a type 1 transmembrane protein that induces T cell anergy through the ubiquitination activity of its cytosolic RING finger. GRAIL also contains an equally large luminal region consisting primarily of an uncharacterized protease-associated (PA) domain. Using two-hybrid technology to screen for proteins that bound the PA domain we identified CD151, a member of the tetraspanin family of membrane proteins. GRAIL bound to the luminal/extracellular portion of both CD151 and the related tetraspanin CD81 using its PA domain, which promoted ubiquitination of cytosolic lysine residues. GRAIL exhibited specificity for lysines only within the tetraspanin amino terminus even in the presence of other cytosolic lysine residues in the substrate. GRAIL-mediated ubiquitination promoted proteasomal degradation and cell surface downregulation of tetraspanins via Lys-48 linkages. As a result, the juxtaposition of PA and RING finger domains across a lipid bilayer facilitates the capture of transmembrane substrates for subsequent ubiquitination. These findings identify for the first time a single subunit E3 ligase containing a substrate-binding domain spatially restricted by a membrane from its E2 recruitment domain as well as an E3 ligase for members of the tetraspanin family.The ubiquitin proteasome pathway consists of a combination of proteins that determines with meticulous precision the post-translational fate of nearly every cellular protein. The sequential enzymes involved in conjugation of ubiquitin to a substrate, E1 2 activating enzymes, E2 transferases, and E3ligases, provide a mechanism of increasing stringency to ensure the serial transfer of ubiquitin to its intended target (1). The majority of substrate specificity is conferred by a wide array of protein interaction motifs on the E3 ligase that are separate from the domains responsible for recruitment of the ubiquitination machinery (2). After covalent attachment of ubiquitin, other classes of ubiquitin-binding proteins decipher this highly informative post-translational modification by binding, editing, or removing the attached ubiquitin molecules (3-5). E3 ligases are split into distinct families based on their E2 recruiting domains, including HECT, RING, and U box. RING finger proteins are the most numerous and can be further divided into multisubunit complexes (SCF and anaphase-promoting complex) or single subunit proteins with modular domains (Cbl and Mdm2). Multisubunit complexes partition function into individualized protein components with the substrate-binding region contained in the F box for the SCFs (6), whereas single subunit RING finger E3 ligases depend on substrate capture via protein-protein interaction domains particular to each (7). The regions critical for substrate binding among RING finger E3 ligases vary greatly, making prediction and identification of potential substrates difficult. In addition, the limited number of E3 ligases compared with the total number of prot...