UDP-galactose:ceramide galactosyltransferase (CGalT) transfers UDP-galactose to ceramide to form the glycosphingolipid galactosylceramide. Galactosylceramide is the major constituent of myelin and is also highly enriched in many epithelial cells, where it is thought to play an important role in lipid and protein sorting. Although the biochemical pathways of glycosphingolipid biosynthesis are relatively well understood, the localization of the enzymes involved in these processes has remained controversial. We here have raised antibodies against CGalT and shown by immunocytochemistry on ultrathin cryosections that the enzyme is localized to the endoplasmic reticulum and nuclear envelope but not to the Golgi apparatus or the plasma membrane. In pulse-chase experiments, we have observed that newly synthesized CGalT remains sensitive to endoglycosidase H, confirming the results of the morphological localization experiments. In protease protection assays, we show that the largest part of the protein, including the amino terminus, is oriented toward the lumen of the endoplasmic reticulum. CGalT enzyme activity required import of UDP-galactose into the lumen of the endoplasmic reticulum by a UDP-galactose translocator that is present in the Golgi apparatus of CHO cells but absent in CHOlec8 cells. Finally, we show that CGalT activity previously observed in Golgi membrane fractions in vitro, in the absence of UDP-glucose, is caused by UDP-glucose:ceramide glucosyltransferase. Therefore all galactosylceramide synthesis occurs by CGalT in vivo in the lumen of the endoplasmic reticulum.