In response to phenolic compounds exuded by the host plant, symbiotic Rhizobium bacteria produce signal molecules (Nod factors), consisting of lipochitooligosaccharides with strain-specific substitutions. In Azorhizobium caulinodans strain ORS571 these modifications are an O-arabinosyl group, an O-carbamoyl group, and an N-methyl group. Several lines of evidence indicate that the nodS gene located in the nodABCSUIJ operon is implicated in the methylation of Nod factors. Previously we have shown that NodS is an S-adenosyl-L-methionine (SAM)-binding protein, essential for the L-[3H-methyl]-methionine labelling of ORS571 Nod factors in vivo. Here, we present an in vitro assay showing that NodS from either A. caulinodans or Rhizobium species NGR234 methylates end-deacetylated chitooligosaccharides, using [3H-methyl]-SAM as a methyl donor. The enzymatic and SAM-binding activity were correlated with the nodS gene and localized within the soluble protein fraction. The A. caulinodans nodS gene was expressed in Escherichia coli and a glutathione-S-transferase-NodS fusion protein purified. This protein bound SAM and could methylate end-deacetylated chitooligosaccharides, but could not fully methylate acetylated chitooligosaccharides or unmethylated lipo-chitooligosaccharides. These data implicate that the methylation step in the biosynthesis pathway of ORS571 Nod factors occurs after deacetylation and prior to acylation of the chitooligosaccharides.