Acylation of specific cellular proteins is apparently ubiquitous in eukaryotes, occurring in yeast, plant, and invertebrate and vertebrate animal cells. Three modes of fatty acid linkage to eukaryotic proteins have been described. These are: (a) posttranslational attachment of fatty acid (primarily palmitate) in a thioester or ester bond to cysteine, serine, or threonine residues; (b) cotranslational myristoylation of proteins on amino-terminal glycine residues via a amide linkage; and (c) carboxy-terminal addition of a phosphatidyl inositol-containing glycan moiety to proteins shortly after the completion of polypeptide chain biosynthesis. Other modes of fatty acid linkage to protein may exist, in particular amide-linkage of palmitic and stearic acids. The distinct fatty acid specificities and temporal differences (i.e. co- versus post-translational modification) exhibited by these various modes of protein acylation suggest that unique biological roles may be served by each type of acylation. The full spectrum of functions fulfilled by protein acylation remains to be established. While some acylproteins clearly require their acyl chains for stable association with cellular membranes, others normally behave as soluble proteins. The Vesicular Stomatitis Virus G protein, an integral membrane protein that normally contains palmitic acid, remains membrane-associated in the absence of its acyl chain and is thus independent of fatty acylation for stable membrane insertion. Thus, other proposed functions, such as promoting specific protein:protein interactions, directing membrane fusion events, or influencing the 'correct' folding of a protein, remain to be more fully explored. Some of the enzymes that catalyze the covalent modification of proteins with lipid have recently been detected in cell-free systems. One protein acyltransferase - myristoyl Coenzyme A: protein N-myristoyl transferase, or NMT - has been purified to apparent homogeneity from Saccharomyces cerevisiae. The substrate specificity of this enzyme has been extensively examined using a series of synthetic peptides whose sequences were systematically altered from those present at the amino-termini of known N-myristoyl proteins. Studies of the catalytic properties of this enzyme, the homologous activity present in mammalian cells, and description of the biological consequences of protein N-myristoylation, are the main subjects of this review, since, at present, protein N-myristoylation in perhaps the best understood protein acylation system. Brief comparisons will be made when possible with ester/thioester-linked protein acylation systems, which have been investigated in less detail. The reader is referred to other recent articles, including one in this volume, for reviews of protein modification with glycophospholipid.