The products of the rhizobial nodulation genes are involved in the biosynthesis of lipochitin oligosaccharides (LCOs), which are host-specific signal molecules required for nodule formation. The presence of an O-acetyl group on C-6 of the nonreducing N-acetylglucosamine residue of LCOs is due to the enzymatic activity of NodL. Here we show that transfer of the nodL gene into four rhizobial species that all normally produce LCOs that are not modified on C-6 of the nonreducing terminal residue results in production of LCOs, the majority of which have an acetyl residue substituted on C-6. Surprisingly, in transconjugant strains of Mesorhizobium loti, Rhizobium etli, and Rhizobium tropici carrying nodL, such acetylation of LCOs prevents the endogenous nodS-dependent transfer of the N-methyl group that is found as a substituent of the acylated nitrogen atom. To study this interference between nodL and nodS, we have cloned the nodS gene of M. loti and used its product in in vitro experiments in combination with purified NodL protein. It has previously been shown that a chitooligosaccharide N deacetylated on the nonreducing terminus (the so-called NodBC metabolite) is the preferred substrate for NodS as well as for NodL. Here we show that the NodBC metabolite, acetylated by NodL, is not used by the NodS protein as a substrate while the NodL protein can acetylate the NodBC metabolite that has been methylated by NodS.Rhizobial bacteria have the unique ability to induce formation of nitrogen-fixing nodules on the roots or stems of leguminous plants. The development of legume nodules is largely controlled by reciprocal signal exchange between the symbiotic partners. Legume roots secrete specific flavonoids or isoflavonoids that induce the transcription of many bacterial genes (nod, nol, and noe genes). Most of these genes are involved in the synthesis and secretion of signal molecules that are essential to trigger nodule formation and that are known as Nod factors. Nod factors from many rhizobial species have been characterized, and their structures have been elucidated. Because their basic structure consists of a chitin oligosaccharide backbone N acylated on the nonreducing terminal residue, they are referred to as lipochitin oligosaccharides (LCOs). The nature of the fatty acid and the combination of diverse chemical substitutions provide host specificity to the LCOs produced by a given rhizobial strain (for reviews, see references 1, 7, 9, and 25).