Deacetylcephalosporin C acetyltransferase (DAC-AT) catalyses the last step in the biosynthesis of cephalosporin C, a broad-spectrum beta-lactam antibiotic of large clinical importance. The acetyl transfer step has been suggested to be limiting for cephalosporin C biosynthesis, but has so far escaped detailed structural analysis. We present here the crystal structures of DAC-AT in complexes with reaction intermediates, providing crystallographic snapshots of the reaction mechanism. The enzyme is found to belong to the alpha/beta hydrolase class of acetyltransferases, and the structures support previous observations of a double displacement mechanism for the acetyl transfer reaction in other members of this class of enzymes. The structures of DAC-AT reported here provide evidence of a stable acyl-enzyme complex, thus underpinning a mechanism involving acetylation of a catalytic serine residue by acetyl coenzyme A, followed by transfer of the acetyl group to deacetylcephalosporin C through a suggested tetrahedral transition state.