A gene from Saccharomyces cerevisiae has been mapped, cloned, sequenced and shown to encode a catalytic subunit of an N-terminal acetyltransferase. Regions of this gene, NAT1, and the chloramphenicol acetyltransferase genes of bacteria have limited but significant homology. A nat1 null mutant is viable but exhibits a variety of phenotypes, including reduced acetyltransferase activity, derepression of a silent mating type locus (HML) and failure to enter G0. All these phenotypes are identical to those of a previously characterized mutant, ard1. NAT1 and ARD1 are distinct genes that encode proteins with no obvious similarity. Concomitant overexpression of both NAT1 and ARD1 in yeast causes a 20-fold increase in acetyltransferase activity in vitro, whereas overexpression of either NAT1 or ARD1 alone does not raise activity over basal levels. A functional iso-1-cytochrome c protein, which is N-terminally acetylated in a NAT1 strain, is not acetylated in an isogenic nat1 mutant. At least 20 other yeast proteins, including histone H2B, are not N-terminally acetylated in either nat1 or ard1 mutants. These results suggest that NAT1 and ARD1 proteins function together to catalyze the N-terminal acetylation of a subset of yeast proteins.