MHC class II molecules and invariant chain assemble at a neutral pH in the endoplasmic reticulum and are transported to a low pH compartment where the invariant chain is trimmed to the class II–associated invariant chain peptide (CLIP). For many major histocompatibility complex class II molecules, DM is required for rapid removal of CLIP, which allows binding of antigenic peptides. Since I-A^g7 confers susceptibility to type I diabetes in NOD mice, the biochemical requirements for peptide loading were examined using soluble I-A^g7 expressed in insect cells. I-A^g7 formed long-lived complexes with naturally processed peptides from transferrin and albumin, whereas several peptides that represent T cell epitopes of islet autoantigens were poor binders. I-A^g7–peptide complexes were not sodium dodecyl sulfate (SDS) resistant, indicating that SDS sensitivity may be an intrinsic property of I-A^g7. Complexes of I-A^g7 and CLIP formed at a neutral pH, but rapidly dissociated at pH 5. This rapid dissociation was due to a poor fit of M98 of CLIP in the P9 pocket of I-A^g7, since substitution of M98 by a negatively charged residue greatly enhanced the stability of the complex. These biochemical properties of I-A^g7 result in the rapid generation of empty molecules at an endosomal pH and have a global effect on peptide binding by I-A^g7.