The epidermal growth factor receptor ligands transforming growth factor alpha (TGF alpha) and amphiregulin are delivered to the basolateral surface of polarized epithelial cells where they are cleaved by TACE/ADAM17. Basolateral sorting information resides in their cytoplasmic tail domains, but tail-interacting proteins required for basolateral trafficking have not been identified. Naked (NKD)1 and NKD2 are mammalian homologs of Drosophila Naked Cuticle, which negatively regulates canonical Wnt signaling by binding Dishevelled. We present evidence that NKD2, but not NKD1, binds to basolateral sorting motifs in the cytoplasmic tail of TGF alpha. Processing and cell-surface delivery of TGF alpha are accelerated in NKD2-overexpressing Madin-Darby canine kidney cells. NKD2 is myristoylated on glycine, the second residue. On expression of myristoylation-defective (G2A) NKD2, neither NKD2 nor TGF alpha appears at the basolateral plasma membrane of polarized Madin-Darby canine kidney cells; however, membrane staining for TGF alpha is restored on silencing expression of this mutant NKD2. Amphiregulin does not interact with NKD2 and retains its basolateral localization in G2A-NKD2-expressing cells, as do Na(+), K(+) ATPase alpha 1 and E-cadherin. These data identify an unexpected function for NKD2, i.e., myristoylation-dependent escort of TGF alpha to the basolateral plasma membrane of polarized epithelial cells.