The 110 kDa haemolysin protoxin (proHlyA) is activated in the Escherichia coli cytosol by acyl carrier protein-dependent fatty acylation of two internal lysine residues, directed by the co-synthesized protein HlyC. Using an in vitro maturation reaction containing purified protoxin peptides and acylACP, we show unambiguously that HlyC possesses an apparently unique acyltransferase activity fully described by Michaelis-Menten analysis. The Vmax of HlyC at saturating levels of both substrates was approximately 115 nmol acyl group min-1 mg-1 with KMacylACP of 260 nM and KMproHlyA of 27 nM, kinetic parameters sufficient to explain why in vivo HlyC is required at a concentration equimolar to proHlyA. HlyC bound the fatty acyl group from acylACP to generate an acylated HlyC intermediate that was depleted in the presence of proHlyA, but enriched in the presence of proHlyA derivatives lacking acylation target sites. HlyC was also able to bind in vivo 4'-phosphopantetheine. Substitution of conserved amino acids that could act as putative covalent attachment sites did not prevent binding of the fatty acyl or 4'-phosphopantetheine groups. These data and substrate variation analyses suggest that the unique acylation reaction does not involve covalent attachment of fatty acid to the acyltransferase, but rather that it proceeds via a sequential ordered Bi-Bi reaction mechanism, requiring the formation of a non-covalent ternary acylACP-HlyC-proHlyA complex.