Glycopeptidolipids (GPLs) are major components of the cell walls of several species of mycobacteria. We have isolated a transposon mutant of Mycobacterium smegmatis that is unable to synthesize mature GPLs and that displays a rough colony morphology. The disrupted gene, mtf1, shares a high degree of homology with several S-adenosylmethionine-dependent methyltransferases. The enzyme encoded by mtf1 is required for the methylation of a single rhamnose residue that forms part of the conserved GPL core structure. This conclusion is supported by the finding that (a) the mutant synthesized only GPLs with undermethylated (either mono- or nonmethylated instead of di- or trimethylated) rhamnose residues; (b) complementation of the mutant with a wild-type copy of mtf1 restored high levels of synthesis of GPLs containing di- and trimethylated rhamnose; and (c) S-adenosylmethionine-dependent methylation of rhamnosylated GPLs could be detected in cell lysates of wild-type cells and mtf1-complemented mutant cells, but not in mutant cells lacking intact mtf1. Structural analysis of wild-type and mutant GPLs suggests that disruption of mtf1 specifically inhibits addition of O-methyl groups to the 3 (or 2)-position of the rhamnose. In the absence of 3-O-methylation, further methylation of GPL rhamnose is apparently inhibited, and overall GPL synthesis is down-regulated by 90%.