Membrane lipid biosynthesis is a complex process that takes place in various intracellular compartments. Glycosylphosphatidylinositol (GPI), a lipid involved in membrane anchoring of some proteins, is synthesized by the PIG enzymes. Most PIGs are localized to the endoplasmic reticulum (ER), but Drosophila PIG-B (DmPIG-B) is localized to the nuclear envelope (NE). To determine whether the NE localization of DmPIG-B is functionally important, we defined the determinants of localization and generated an ER-localized form, denoted DmPIG-BER. The enzymatic activity of DmPIG-BER was comparable to that of NE-localized DmPIG-BNE. Expression of DmPIG-BER inefficiently rescued the lethality of the PIG-B mutant, whereas DmPIG-BNE rescued this lethality fully. DmPIG-BER was preferentially degraded by lysosomes, suggesting that the NE localization is essential for function and stability of the protein. In addition, we found that the region of the ER proximal to the NE is the site of translation of GPI-anchored proteins and addition of GPI. Thus, the NE and proximal ER may provide a platform for efficient GPI anchoring.