Occludin is a transmembrane protein of the tight junction with two extracellular loops. Our previous demonstration that the extracellular loops are adhesive suggested the possibility that they contribute to localizing occludin at the tight junction. To address this question, truncated forms of occludin were generated in which one or both of the extracellular loops were deleted. These constructs were expressed in both occludin-null Rat-1 fibroblasts and in MDCK epithelial cells. The patterns of sensitivity to proteinase K suggested all constructs were present on the plasma membrane and retained the normal topology. In fibroblasts, all truncated forms of occludin colocalized with ZO-1 at regions of cell-cell contact, demonstrating that even in the absence of tight junctions cytoplasmic interactions with ZOs is sufficient to cluster occludin. In MDCK cell monolayers, both full-length and occludin lacking the first extracellular loop colocalized with ZO-1 at the tight junction. In contrast, constructs lacking the second, or both, extracellular loops were absent from tight junctions and were found only on the basolateral cell surface. By freeze-fracture electron microscopic analysis, overexpression of full length occludin induced side-to-side aggregation of fibrils within the junction, while excess occludin on the lateral membrane did not form fibrils. These results suggest that the second extracellular domain is required for stable assembly of occludin in the tight junction and that occludin influences the structural organization of the paracellular barrier.