Annexin A2 (AnxA2), a Ca2+-regulated phospholipid binding protein involved in membrane-cytoskeleton contacts and membrane transport, exists in two physical states, as a monomer or in a heterotetrameric complex mediated by S100A10. Formation of the AnxA2-S100A10 complex is of crucial regulatory importance because only the complex is firmly anchored in the plasma membrane, where it functions in the plasma membrane targeting/recruitment of certain ion channels and receptors. The S100A10 binding motif is located in the first 12 residues of the AnxA2 N-terminal domain, but conflicting reports exist as to the importance of N-terminal AnxA2 acetylation with regard to S100A10 binding. We show here that AnxA2 is subject to N-terminal modification when expressed heterologously in Escherichia coli. Met1 is removed and Ser2 is acetylated, yielding the same modification as the authentic mammalian protein. Bacterially expressed and N-terminally acetylated AnxA2 binds S100A10 with an affinity comparable to AnxA2 from porcine tissue and is capable of forming the AnxA2-S100A10 heterotetramer. Complex formation is competitively inhibited by acetylated but not by non-acetylated peptides covering the N-terminal AnxA2 sequence. These results demonstrate that N-terminal acetylation of AnxA2 is required for S100A10 binding and that this common eukaryotic modification is also obtained upon expression in bacteria.