GAD65, the smaller isoform of the enzyme glutamic acid decarboxylase, synthesizes GABA for fine-tuning of inhibitory neurotransmission. GAD65 is synthesized as a soluble hydrophilic protein but undergoes a hydrophobic post-translational modification and becomes anchored to the cytosolic face of Golgi membranes. A second hydrophobic modification, palmitoylation of Cys30 and Cys45 in GAD65, is not required for the initial membrane anchoring but is crucial for post-Golgi trafficking of the protein to presynaptic clusters. The mechanism by which palmitoylation directs targeting of GAD65 through and out of the Golgi complex is unknown. Here, we show that prior to palmitoylation, GAD65 anchors to both ER and Golgi membranes. Palmitoylation, however, clears GAD65 from the ER-Golgi, targets it to the trans-Golgi network and then to a post-Golgi vesicular pathway. FRAP analyses of trafficking of GAD65-GFP reveal a rapid and a slow pool of protein replenishing the Golgi complex. The rapid pool represents non-palmitoylated hydrophobic GAD65-GFP, which exchanges rapidly between the cytosol and ER/Golgi membranes. The slow pool represents palmitoylation-competent GAD65-GFP, which replenishes the Golgi complex via a non-vesicular pathway and at a rate consistent with a depalmitoylation step. We propose that a depalmitoylation-repalmitoylation cycle serves to cycle GAD65 between Golgi and post-Golgi membranes and dynamically control levels of enzyme directed to the synapse.