Histocompatibility molecules are peptide-binding proteins and present antigenic peptides to T cells. In spite of similarity in structure and peptide specificity, class-I and class-II histocompatibility molecules present peptides at different intracellular locations. Class-I molecules present peptides derived from endogenous proteins, but class-II molecules can present peptides from endocytosed (exogenous) antigen as well as endogenous antigen. Binding of antigenic peptides by histocompatibility molecules is a function of their assembly, intracellular trafficking, and endocytosis. For class-I molecules, assembly appears to be the most important step for peptide acquisition, while all three processes can potentially influence class-II antigen presentation. The versatility of peptide binding by class-II MHC molecules is due to its association with the invariant chain which blocks peptide binding during the initial stages of class-II assembly and export and contributes to the endosomal targeting of class-II molecules. Once invariant chain dissociates, class-II molecules become competent to bind peptides and are released to the cell surface. The location in which a particular antigenic peptide is produced is a function both of its route of introduction into the cell and its susceptibility to degradation. These factors contribute significantly to whether an antigen will be presented by class-I or class-II molecules and should be taken into account in the design and development of vaccines.