Hemolysin (HlyA) and related toxins of Escherichia coli and other Gram-negative pathogenic bacteria form membrane pores in cells of the host immune system, causing cell dysfunction and death. An insight into the mechanism by which HlyA is targetted to mammalian cell membranes was achieved by establishing in vitro activation of the non-toxic precursor proHlyA. By this approach we have discovered that conversion of proHlyA to the post-translational active HlyA toxin is determined by fatty acylation of proHlyA in an apparently novel process directed by the HlyC homodimer activator protein, and dependent upon the cellular acyl carrier protein (ACP). By further exploiting the in vitro activation system it is now possible to obtain direct evidence that HlyC binds to an internal recognition sequence in the proHlyA precursor, in this way providing specificity for the transfer to proHlyA of a fatty acid moiety carried by the ACP. It is possible that the fatty acid modification determines directly the binding of HlyA to mammalian membrane lipids, thus initiating the toxin interaction with the target cells.