Dynamic regulation of signal transduction by reversible palmitoylation-depalmitoylation cycles has been recently described. However, further understanding of fatty acylation reactions has been hampered by our lack of knowledge about the specific transferases and thioesterases involved. Here, we describe an assay for the palmitoyl acyltransferase (PAT) that palmitoylates "myrGlyCys" containing members of the Src family of protein tyrosine kinases (PTKs). Since N-myristoylation of Fyn PTK, a member of the Src family, has been shown to be a prerequisite for palmitolylation, a new single plasmid vector that allows overexpression of myristoylated Fyn substrate in Escherichia coli was developed. Purified myristoylated protein substrates were incubated with [125I]iodopalmitoyl CoA, a palmitoyl CoA analog, in the presence of bovine brain lysates. Transfer of radiolabel to the Fyn substrate was detected by SDS-polyacrylamide gel electrophoresis and autoradiography. This assay was used to partially purify and characterize PAT activity from bovine brain. Here, we demonstrate that PAT is a membrane-bound enzyme, which palmitoylates myristoylated Fyn substrates containing a cysteine residue in position three. The PAT activity attached palmitate to Fyn proteins via a thioester linkage and exhibited a fatty acyl CoA preference for long chain fatty acids. It is likely that palmitoylation of Fyn and other Src family members by PAT regulates PTK localization and signaling functions.