CD23-bearing cells are known to release 37,000 33,000 and 25,000 MW soluble CD23 (sCD23) fragments that were reported to display multiple biological activities, including the potentiation of IgE synthesis. We previously reported that tunicamycin treatment of RPMI-8866 cells switched the biological activity of the sCD23 released by these cells from IgE potentiation to IgE suppression. In this study we show that tunicamycin-treated cells release small CD23 fragments with a MW of 16,000. These fragments are formed by truncation of the N-terminal 160 amino acids and truncation of the carboxy-terminal end of CD23. Two observations indicate that the cleavage of surface CD23 into 16,000 MW fragments is not caused by tunicamycin-mediated inhibition of the N-glycosylation of CD23 but rather by the deletion of the carboxy terminal end of the molecule: (1) Chinese hamster ovary (CHO) transfectants expressing a CD23 mutant lacking the N-glycosylation site release 37,000-33,000 MW sCD23 unless they are treated with tunicamycin; (2) transfectants expressing a CD23 deletion mutant lacking the last 33 carboxy-terminal amino acids release 16,000 MW sCD23. Highly purified native and recombinant 16,000 MW sCD23 bind to IgE and down-regulate the ongoing and the interleukin-4 (IL-4)-stimulated synthesis of IgE.