The large hepatitis B virus (HBV) surface protein (L) forms two isomers which display their N-terminal pre-S domain at the internal and external side of the viral envelope, respectively. The external pre-S domain has been implicated in binding to a virus receptor. To investigate functions of the internal pre-S domain, a secretion signal sequence was fused to the N terminus of L (sigL), causing exclusive expression of external pre-S domains. A fusion construct with a nonfunctional signal (s25L), which corresponds in its primary sequence to sigL cleaved by signal peptidase, was used as a control. SigL was N glycosylated in transfected COS cells at both potential sites in pre-S in contrast to s25L or wild-type L, confirming the expected transmembrane topologies of sigL and s25L. Phenotypic characterization revealed the following points. (i) SigL lost the inhibitory effect of L or s25L on secretion of subviral hepatitis B surface antigen particles, suggesting that the retention signal mapped to the N terminus of L is recognized in the cytosol and not in the lumen of the endoplasmic reticulum. (ii) SigL was secreted into the culture medium even in the absence of the major HBV surface protein (S), while release of an L mutant lacking the retention signal was still dependent on S coexpression. (iii) s25L but not sigL could complement an L-negative HBV genome defective for virion secretion in cotransfections. This suggests that the cytosolic pre-S domain, like a matrix protein, is involved in the interaction of the viral envelope with preformed cytosolic nucleocapsids during virion assembly.