ADP-ribosylation factor (ARF) is a small GTP-binding protein that has been implicated in intracellular vesicular transport, ARF regulates the budding of vesicles that mediate endoplasmic reticulum to Golgi and intra-Golgi transport. It also plays an important role in maintaining the function and morphology of the Golgi apparatus. Using a permeabilized cell system derived from GH(3) cells, we provide evidence that ARF-1 regulates the formation of nascent secretory vesicles from the trans-Golgi network. Both myristoylated and non-myristoylated forms of recombinant human ARF-1 enhanced secretory vesicle budding about 2-fold. A mutant lacking the first 17 N-terminal residues, as well as one that preferentially binds GDP (T31N) did not stimulate vesicle formation. In contrast, a mutant defective in GTP hydrolysis (Q71L) promoted vesicle budding. Strikingly, a peptide corresponding to the N terminus of human ARF-1 (amino acids 2-17) also stimulated vesicle budding from the trans-Golgi network, in marked contrast to its inhibitory effect on vesicular transport from the endoplasmic reticulum to Golgi. These data demonstrate that in endocrine cells, ARF-1 and in particular its N terminus play an essential role in the formation of secretory vesicles.