Expression of hepatitis B surface antigen (HBsAg), the major envelope protein of the virus, in the absence of other viral proteins leads to its secretion as oligomers in the form of disk-like or tubular lipoprotein particles. The observation that these lipoprotein particles are heavily disulphide crosslinked is paradoxical since HBsAg assembly is classically believed to occur in the ER, and hence in the presence of high levels of protein disulphide isomerase (PDI) which should resolve these higher intermolecular crosslinks. Indeed, incubation of mature, highly disulphide crosslinked HBsAg with recombinant PDI causes the disassembly of HBsAg to dimers. We have used antibodies against resident ER proteins in double immunofluorescence studies to study the stages of the conversion of the HBsAg from individual protein subunits to the secreted, crosslinked, oligomer. We show that HBsAg is rapidly sorted to a post-ER, pre-Golgi compartment which excludes PDI and other major soluble resident ER proteins although it overlaps with the distribution of rab2, an established marker of an intermediate compartment. Kinetic studies showed that disulphide-linked HBsAg dimers began to form during a short (2 min) pulse, increased in concentration to peak at 60 min, and then decreased as the dimers were crosslinked to form higher oligomers. These higher oligomers are the latest identifiable intracellular form of HBsAg before its secretion (t 1/2 = 2 h). Brefeldin A treatment does not alter the localization of HBsAg in this PDI excluding compartment, however, it blocks the formation of new oligomers causing the accumulation of dimeric HBsAg. Hence this oligomerization must occur in a pre-Golgi compartment. These data support a model in which rapid dimer formation, catalyzed by PDI, occurs in the ER, and is followed by transport of dimers to a pre-Golgi compartment where the absence of PDI and a different lumenal environment allow the assembly process to be completed.