The structures of Rhizobium leguminosarum and Rhizobium etli lipid A are distinct from those found in other Gram-negative bacteria. Whereas the more typical Escherichia coli lipid A is a hexa-acylated disaccharide of glucosamine that is phosphorylated at positions 1 and 4', R. etli and R. leguminosarum lipid A consists of a mixture of structurally related species (designated A-E) that lack phosphate. A conserved distal unit, comprised of a diacylated glucosamine moiety with galacturonic acid residue at position 4' and a secondary 27-hydroxyoctacosanoyl (27-OH-C28) as part of a 2' acyloxyacyl moiety, is present in all five components. The proximal end is heterogeneous, differing in the number and lengths of acyl chains and in the identity of the sugar itself. A proximal glucosamine unit is present in B and C, but an unusual 2-amino-2-deoxy-gluconate moiety is found in D-1 and E. We now demonstrate that membranes of R. leguminosarum and R. etli can convert B to D-1 in a reaction that requires added detergent and is inhibited by EDTA. Membranes of Sinorhizobium meliloti and E. coli lack this activity. Mass spectrometry demonstrates that B is oxidized in vitro to a substance that is 16 atomic mass units larger, consistent with the formation of D-1. The oxidation of the lipid A proximal unit is also demonstrated by matrix-assisted laser desorption ionization time-of-flight mass spectrometry in the positive and negative modes using the model substrate, 1-dephospho-lipid IV(A). With this material, an additional intermediate (or by product) is detected that is tentatively identified as a lactone derivative of 1-dephospho-lipid IV(A). The enzyme, presumed to be an oxidase, is located exclusively in the outer membrane of R. leguminosarum as judged by sucrose gradient analysis. To our knowledge, an oxidase associated with the outer membranes of Gram-negative bacteria has not been reported previously.