Protein palmitoylation refers to the posttranslational addition of a 16 carbon fatty acid to the side chain of cysteine, forming a thioester linkage. This acyl modification is readily reversible, providing a potential regulatory mechanism to mediate protein-membrane interactions and subcellular trafficking of proteins. The mechanism that underlies the transfer of palmitate or other long-chain fatty acids to protein was uncovered through genetic screens in yeast. Two related S-palmitoyltransferases were discovered. Erf2 palmitoylates yeast Ras proteins, whereas Akr1 modifies the yeast casein kinase, Yck2. Erf2 and Akr1 share a common sequence referred to as a DHHC(aspartate-histidine-histidine-cysteine) domain. Numerous genes encoding DHHC domain proteins are found in all eukaryotic genome databases. Mounting evidence is consistent with this signature motif playing a direct role in protein acyltransferase ( PAT) reactions, although many questions remain. This review presents the genetic and biochemical evidence for the PAT activity of DHHC proteins and discusses the mechanism of protein-mediated palmitoylation.