The DMαand DMβgenes encode a nonpolymorphic, class II-like molecule which functions by an, as yet, undefined mechanism in the assembly of Major Histocompatibility Complex class II-peptide complexes. Indeed, mutant cells which express class II molecules but fail to express DM are unable to process and present native protein antigens. A striking phenotype of the mutation is class II molecules that contain almost exclusively a nested set of invariant chain peptides, termed CLIP, for class II associated Ii peptides, instead of the normal array of endogenously and exogenously derived peptides. Thus, DM appears to be required for the correct assembly of processed antigen-class II complexes. Recently, the subcellular compartments that contain DM and in which functional processed antigen-class II complexes are first formed have been described. Here, the evidence for the function of DM in the antigen-processing compartments is reviewed.