Lgt of Escherichia coli catalyzes the transfer of an sn-1,2-diacylglyceryl group from phosphatidylglycerol to prolipoproteins. The enzyme is essential for growth, as demonstrated here by the analysis of an lgt depletion strain. Cell fractionation demonstrated that Lgt is an inner membrane protein. Its membrane topology was determined by fusing Lgt to β-galactosidase and alkaline phosphatase and by substituted cysteine accessibility method (SCAM) studies. The data show that Lgt is embedded in the membrane by seven transmembrane segments, that its N terminus faces the periplasm, and that its C terminus faces the cytoplasm. Highly conserved amino acids in Lgt of both Gram-negative and Gram-positive bacteria were identified. Lgt enzymes are characterized by a so-called Lgt signature motif in which four residues are invariant. Ten conserved residues were replaced with alanine, and the activity of these Lgt variants was analyzed by their ability to complement the lgt depletion strain. Residues Y26, N146, and G154 are absolutely required for Lgt function, and R143, E151, R239, and E243 are important. The results demonstrate that the majority of the essential residues of Lgt are located in the membrane and that the Lgt signature motif faces the periplasm.