Phenolic glycolipids (PGLs) are non-covalently bound components of the outer membrane of many clinically relevant mycobacterial pathogens, and play important roles in pathogen biology. We report a mutational analysis that conclusively demonstrates that the conserved acyltransferase-encoding gene papA5 is essential for PGL production. In addition, we provide an in vitro acyltransferase activity analysis that establishes proof of principle for the competency of PapA5 to utilize diol-containing polyketide compounds of mycobacterial origin as acyl-acceptor substrates. Overall, the results reported herein are in line with a model in which PapA5 catalyses the acylation of diol-containing polyketides to form PGLs. These studies advance our understanding of the biosynthesis of an important group of mycobacterial glycolipids and suggest that PapA5 might be an attractive target for exploring the development of antivirulence drugs.