Antigen processing in B lymphocytes entails initial binding of antigen to the surface Ig and internalization of the antigen into acidic compartments where the antigen is degraded, releasing peptides for binding to major histocompatibility complex class II molecules. Using subcellular fractionation techniques we show that functional, processed antigen-class II complexes capable of activating antigen-specific T cells in vitro are first formed in dense vesicles cosedimenting with lysosomes which are distinct from early endosomes and the bulk of late endosomes. With time, processed antigen-class II complexes appear in vesicles sedimenting with early endosomes and finally cofractionate with plasma membrane. A separate compartment is identified which contains major histocompatibility complex class II receptive to peptide binding but which does not have access to processed antigen in the B cell. These class II molecules are in the so-called "floppy" form in contrast to the class II molecules in the very dense vesicles which are in the "compact" form. These results demonstrate a correlation between the floppy and compact forms of class II molecules and their association with processed antigen and show that floppy and compact forms of class II reside in distinct and physically separable subcellular compartments.