We have recently reported that expression in yeast cells of P-glycoprotein (P-gp) encoded by the mouse multidrug resistance mdr3 gene (Mdr3) can complement a null ste6 mutation (M. Raymond, P. Gros, M. Whiteway, and D. Y. Thomas, Science 256:232-234, 1992). Here we show that Mdr3 behaves as a fully functional drug transporter in this heterologous expression system. Photolabelling experiments indicate that Mdr3 synthesized in yeast cells binds the drug analog [125I]iodoaryl azidoprazosin, this binding being competed for by vinblastine and tetraphenylphosphonium bromide, two known multidrug resistance drugs. Spheroplasts expressing wild-type Mdr3 (Ser-939) exhibit an ATP-dependent and verapamil-sensitive decreased accumulation of [3H]vinblastine as compared with spheroplasts expressing a mutant form of Mdr3 with impaired transport activity (Phe-939). Expression of Mdr3 in yeast cells can confer resistance to growth inhibition by the antifungal and immunosuppressive agent FK520, suggesting that this compound is a substrate for P-gp in yeast cells. Replacement of Ser-939 in Mdr3 by a series of amino acid substitutions is shown to modulate both the level of cellular resistance to FK520 and the mating efficiency of yeast mdr3 transformants. The effects of these mutations on the function of Mdr3 in yeast cells are similar to those observed in mammalian cells with respect to drug resistance and transport, indicating that transport of a-factor and FK520 in yeast cells is mechanistically similar to drug transport in mammalian cells. The ability of P-gp to confer cellular resistance to FK520 in yeast cells establishes a dominant phenotype that can be assayed for the positive selection of intragenic revertants of P-gp inactive mutants, an important tool for the structure-function analysis of mammalian P-gp in yeast cells.