The ATP binding cassette (ABC) half-transporter ABCG2 (MXR/BCRP/ABCP) is associated with mitoxantrone resistance accompanied by cross-resistance to a broad spectrum of cytotoxic drugs. Here we investigate the functional consequences of mutating a highly conserved lysine in the Walker A motif of the nucleotide binding domain (NBD) known to be critical for ATP binding and/or hydrolysis in ABC transporters. The mutant (ABCG2-K86M) was inactive as expected but was expressed at similar levels as the wild-type (wt) protein. The mutation did not affect the predicted oligomerization properties of the transporter; hence, co-immunoprecipitation experiments using differentially tagged transporters showed evidence for oligomerization of both ABCG2-wt and of ABCG2-wt with ABCG2-K86M. We also obtained evidence that both ABCG2-wt and ABCG2-K86M exist in the cells as disulfide-linked dimers. Moreover, measurement of prazosin-stimulated ATPase activity revealed a dominant-negative effect of ABCG2-K86M on ABCG2-wt function in co-transfected HEK293 cells. This is consistent with the requirement for at least two active NBDs for transporter activity and suggests that the transporter is a functional dimer. Finally, we analyzed targeting of ABCG2-wt and ABCG2-K86M and observed that they localize to two distinct subcellular compartments: ABCG2-wt targets the cell surface whereas ABCG2-K86M is targeted to the Golgi apparatus followed by retrieval to the endoplasmic reticulum. This suggests an as yet unknown role of the NBDs in assisting proper surface targeting of ABC transporters.