Pulmonary surfactant protein C (SP-C) propeptide (proSP-C) is a type II transmembrane protein that is palmitoylated on two cysteines adjacent to its transmembrane domain. To study the structural requirements for palmitoylation of proSP-C, His-tagged human proSP-C and mutant forms were expressed in Chinese hamster ovary cells and analysed by metabolic labelling with [3H]palmitate. Mutations were made in the amino acid sequence representing mature SP-C, as deletion of the N- and C-terminal propeptide parts showed that this sequence by itself could already be palmitoylated. Substitution of the transmembrane domain by an artificial transmembrane domain had no effect on palmitoylation. However, an inverse correlation was found between palmitoylation of proSP-C and the number of amino acids present between the cysteines and the transmembrane domain. Moreover, substitution by alanines of amino acids localized on the N-terminal side of the cysteines had drastic effects on palmitoylation, probably as a result of the removal of hydrophobic amino acids. These data, together with the observation that substitution by alanines of the amino acids localized between the cysteines and the transmembrane domain had no effect on palmitoylation, suggest that the palmitoylation of proSP-C depends not on specific sequence motifs, but more on the probability that the cysteine is in the vicinity of the membrane surface. This is probably determined not only by the number of amino acids between the cysteines and the transmembrane domain, but also by the hydrophobic interaction of the N-terminus with the membrane. This may also be the case for the palmitoylation of other transmembrane proteins.