Ag processing and presentation via MHC class II is essential for activation of CD4(+) T lymphocytes. gamma-IFN-inducible lysosomal thiol reductase (GILT) is present in the MHC class II loading compartment and has been shown to facilitate class II Ag processing and recall responses to Ags containing disulfide bonds such as hen egg lysozyme (HEL). Reduction of proteins within the MHC class II loading compartment is hypothesized to expose residues for class II binding and protease trimming. In vitro analysis has shown that the active site of GILT involves Cys(46) and Cys(49), present in a CXXC motif that shares similarity with the thioredoxin family. To define the functional requirements for GILT in MHC class II Ag processing, a GILT-deficient murine B cell lymphoma line was generated and stably transduced with wild-type and cysteine mutants of GILT. Intracellular flow cytometric, immunoblotting, and immunofluorescence analyses demonstrated that wild-type and mutant GILT were expressed and maintained lysosomal localization. Transduction with wild-type GILT reconstituted MHC class II processing of a GILT-dependent HEL epitope. Mutation of either Cys(46) or Cys(49) abrogated MHC class II processing of a GILT-dependent HEL epitope. In addition, biochemical analysis of these mutants suggested that the active site facilitates processing of precursor GILT to the mature form. Precursor forms of GILT-bearing mutations in Cys(200) or Cys(211), previously found to display thiol reductase activity in vitro, could not mediate Ag processing. These studies demonstrate that the thiol reductase activity of GILT is its essential function in MHC class II-restricted Ag processing.