Human cytomegalovirus (HCMV) UL99 encodes a late tegument protein pp28 that is essential for envelopment and production of infectious virus. This protein is localized to the endoplasmic reticulum-Golgi intermediate compartment (ERGIC) in transfected cells but it localizes to the cytoplasmic assembly compartment (AC) in HCMV-infected cells. Trafficking of pp28 to the AC is required for the assembly of infectious virus. The N-terminal domain (aa 1–61) of pp28 is sufficient for trafficking and function of the wild type protein during viral infection. However, residues required for authentic pp28 trafficking with the exception of the acidic cluster in the N-terminal domain of pp28 remain undefined. Monitoring protein migration on SDS-PAGE, we found that pp28 is phosphorylated in the virus-infected cells and dephosphorylated in the viral particles. By generating substitution mutants of pp28, we showed that three serine residues (aa 41–43) and a tyrosine residue (aa 34) account for its phosphorylation. The mutant forms of pp28 were localized to the plasma membrane as well as the ERGIC in transfected cells. Likewise, these mutant proteins were localized to the plasma membrane as well as the AC in virus-infected cells. These results suggested that phosphorylation of pp28 contributes to its intracellular trafficking and efficient viral assembly and incorporation.