Fatty acid methyl esters are the major radioactive lipid products obtained after incubation of rat lung membranes with [methyl-3H or 14C]S-adenosylmethionine. Evidence which suggests an enzymatic transmethylation includes: time and protein dependence, lack of reaction at 0 degrees C or with heat-denatured membranes, an apparent affinity for S-adenosylmethionine of about 1 microM, inhibition by S-adenosylhomocysteine, and lack of inhibition by 0.1% methanol. Activity was highest in microsomes but present in other membranous fractions. Endogenous activity was highest in membranes from parotid, lung, and pancreas. Products were analyzed by organic solvent extraction, thin layer chromatography, column chromatography, high performance liquid chromatography, and gas chromatography. Identification of methylpalmitate, methylstearate, methyloleate, and methyllinoleate was confirmed by mass spectrometry. Presence of the radioactive methyl group was demonstrated by the variation of isotopic ratios with specific activity. Addition of oleate to incubation mixture increased the rate of product formation and preincubation experiments suggested the absence of long lived intermediates. The data suggest an enzymatic transfer of methyl groups from S-adenosylmethionine to free fatty acids.