Although endosomal proteolysis has been reported (e.g. for peptide hormones and lysosomal enzymes), lysosomes are believed to be the main site of degradation in the endocytic pathway. We have studied the separate roles of lysosomes and prelysosomal endocytic organelles in the degradation of ovalbumin in J774 cells. The ovalbumin was labelled with 125I-tyramine cellobiose (125I-TC-ova). The labelled degradation products formed from this probe are trapped at the site of formation. To separate lysosomes efficiently from prelysosomal endocytic organelles we allowed the cells to endocytose a pulse of colloidal gold particles complexed with ovalbumin. By combining this density shift technique with subcellular fractionation of a postnuclear supernatant in Percoll gradients we could isolate three fractions that were sequentially involved in the endocytic pathway: a light Percoll fraction, a dense Percoll fraction and a gold fraction. The light Percoll fraction contained early endosomes since it was transferrin positive and received endocytic markers such as ovalbumin and horseradish peroxidase (HRP) early (< 5 minutes) after internalization. The dense Percoll fraction was transferrin negative, rab7 positive and received endocytic markers after 10-15 minutes of internalization. The gold-filled fraction was negative for both transferrin and rab7 but highly enriched in the lysosomal enzyme beta-hexosaminidase and was therefore defined as a lysosome. To study the role of endosomes and lysosomes in the degradation of endocytosed material we allowed the cells to take up (via the mannose receptor) 125I-TC-ova. It was found that the main degradation of 125I-TC-ova (measured as acid soluble radioactivity trapped in the organelle) took place in the late endosomes (and not in the lysosomes containing the bulk of the lysosomal enzymes). Our data therefore suggest that the late endosomes operate as an early lysosomal compartment. The terminal lysosomes may serve as storage bodies for acid hydrolases that may be called upon when needed (for instance during phagocytosis).