The primary genetic defect in the lysosomal storage disease mucolipidosis III (ML III) is in the enzyme uridine diphospho-N-acetylglucosamine:lysosomal enzyme N-acetylglucosamine-1-phosphotransferase. This enzyme has two well-defined functions: specific recognition of lysosomal enzymes (recognition function) and phosphorylation of their oligosaccharides (catalytic function). Using fibroblasts from patients with ML III as the source of enzyme, and α-methylmannoside and two lysosomal enzymes as the substrates, we have identified defects in both of these functions. In one group of fibroblasts, the catalytic activity of the N-acetylglucosaminylphosphotransferase is decreased while the ability to recognize lysosomal enzymes as specific substrates remains intact. In the second group of fibroblasts, the ability to recognize lysosomal enzymes is impaired while the catalytic activity of the enzyme is normal. These data provide a biochemical rationale for the previously described genetic heterogeneity among patients with ML III (Honey, N.K., O.T. Mueller, L.E. Little, A.L. Miller, and T.B. Shows, 1982, Proc. Natl. Acad. Sci. USA., 79:7420-7424).