Hepatitis B virus small surface protein is synthesized as a transmembrane protein of the rough endoplasmic reticulum (RER) and then buds into the lumen in the form of subviral particles that are secreted. The closely related large surface protein is also targeted to the RER but is retained in a pre-Golgi compartment and cannot be secreted. It has been assumed that the large surface protein remains as a transmembrane RER protein and hence cannot form particles, possibly because of binding to a host factor on the cytosolic face of the RER membranes. We have reexamined this question and found the following results. (i) The retained large surface protein is associated not with RER but, rather, with a more distal compartment. (ii) Electron microscopy reveals intravesicular 20-nm particles, similar to those formed by the small surface protein. (iii) The large surface protein colocalizes with and binds to calnexin, an ER chaperone protein. Therefore, our results indicate that the large surface protein is capable of budding and forming particles, and hence its intracellular retention cannot be attributed to a cytosolic factor. We interpret the data as evidence that the large surface protein is retained by virtue of interacting with calnexin, a component of what is considered the quality control mechanism of the ER.