The glycosyl-phosphatidylinositol (GPI) anchor mediates the apical sorting of proteins in polarised epithelial cells through its interaction with lipid rafts. Here we investigated the signals required for the apical targeting of the naturally N-glycosylated and GPI-anchored membrane dipeptidase by selective point mutation to remove the GPI anchor addition signal or the sites for N-linked glycosylation, or both. Activity assays, immunoblotting and immunofluorescence microscopy revealed that the constructs lacking the GPI anchor were secreted from Madin-Darby canine kidney (MDCK) cells, whereas those retaining the GPI anchor were attached at the cell surface, irrespective of the glycosylation status. Wild-type membrane dipeptidase was expressed preferentially on the apical surface of both MDCK and CaCo-2 cells. By contrast, the GPI-anchored construct lacking the N-glycans was targeted preferentially to the basolateral surface of both cell types. In constructs lacking the GPI anchor, the N-glycans also targeted the protein to the apical surface. Both the apically targeted, glycosylated and the basolaterally targeted, unglycosylated GPI-anchored forms of the protein were located in detergent-insoluble lipid rafts. These data indicate that it is the N-glycans, not the association of the GPI anchor with lipid rafts, which determine apical targeting of an endogenously N-glycosylated, GPI-anchored protein in polarised epithelial cells.