The D-alanylation of membrane-associated lipoteichoic acid (LTA) in gram-positive organisms requires the D-alanine-D-alanyl carrier protein ligase (AMP) (Dcl) and the D-alanyl carrier protein (Dcp). The dlt operon encoding these proteins (dltA and dltC) also includes dltB and dltD. dltB encodes a putative transport system, while dltD encodes a protein which facilitates the binding of Dcp and Dcl for ligation with D-alanine and has thioesterase activity for mischarged D-alanyl-acyl carrier proteins (ACPs). In previous results it was shown that D-alanyl-Dcp donates its ester residue to membrane-associated LTA (M. P. Heaton and F. C. Neuhaus, J. Bacteriol. 176: 681-690, 1994). However, all efforts to identify an enzyme which catalyzes this D-alanylation process were unsuccessful. It was discovered that incubation of D-alanyl-Dcp in the presence of LTA resulted in the time-dependent hydrolysis of this D-alanyl thioester. D-Alanyl-ACP in the presence of LTA was not hydrolyzed. When Dcp was incubated with membrane-associated D-alanyl LTA, a time and concentration-dependent formation of D-alanyl-Dcp was found. The addition of NaCl to this reaction inhibited the formation of D-alanyl-Dcp and stimulated the hydrolysis of D-alanyl-Dcp. Since these reactions are specific for the carrier protein (Dcp), it is suggested that Dcp has a unique binding site which interacts with the poly(Gro-P) moiety of LTA. It is this specific interaction that provides the functional specificity for the D-alanylation process. The reversibility of this process provides a mechanism for the transacylation of the D-alanyl ester residues between LTA and wall teichoic acid.