Contrasting with earlier immunocytochemical studies of pancreatic islet beta-cells, several recent reports describe polypeptide prohormone processing within the trans-Golgi network (TGN). Such a concern is relevant to beta-cells, wherein cleavage of the connecting polypeptide from soluble proinsulin triggers insulin condensation. Two distinct models describe how hormone condensation might enhance efficiency of storage in secretory granules: sorting for entry into granules would be favored if insulin condensed in the TGN; sorting by retention within granules would be favored if insulin condensed after proinsulin entry into immature granules (IGs). To distinguish these possibilities, we utilized Brefeldin A (BFA) to prevent protein export from the TGN. BFA did not inhibit the activity of proinsulin-processing enzymes, nor did it alter the behavior of the TGN by fractionation on Percoll density gradients. Moreover, BFA did not inhibit constitutive-like protein traffic originating from IGs. However, BFA blocked proinsulin transfer from the TGN to IGs. As long as proinsulin resided in the TGN, conversion to insulin did not occur. Washout of BFA restored granule formation and subsequent insulin production. These data provide biochemical confirmation that the generation of insulin, which is crucial for its passive condensation, occurs with IGs rather than in the TGN.