Many eukaryotic cell surface proteins are anchored to the membrane via glycosylphosphatidylinositol (GPI). The GPI is attached to proteins that have a GPI attachment signal peptide at the carboxyl terminus. The GPI attachment signal peptide is replaced by a preassembled GPI in the endoplasmic reticulum by a transamidation reaction through the formation of a carbonyl intermediate. GPI transamidase is a key enzyme of this posttranslational modification. Here we report that Gaa1p and Gpi8p are components of a GPI transamidase. To determine a role of Gaa1p we disrupted a GAA1/GPAA1 gene in mouse F9 cells by homologous recombination. GAA1 knockout cells were defective in the formation of carbonyl intermediates between precursor proteins and transamidase as determined by an in vitro GPI-anchoring assay. We also show that cysteine and histidine residues of Gpi8p, which are conserved in members of a cysteine protease family, are essential for generation of a carbonyl intermediate. This result suggests that Gpi8p is a catalytic component that cleaves the GPI attachment signal peptide. Moreover, Gaa1p and Gpi8p are associated with each other. Therefore, Gaa1p and Gpi8p constitute a GPI transamidase and cooperate in generating a carbonyl intermediate, a prerequisite for GPI attachment.