The enzyme activity responsible for translocation of saturated acyl chains from the 4'-phosphopantetheine of the acyl carrier protein to the active site cysteine of the beta-ketoacyl synthase in the animal fatty acid synthase has been identified. An enzyme assay was devised that allows uncoupling of the interthiol transfer step from the condensation reaction. Experiments with various fatty acid synthase mutants indicate clearly that catalysis of the transfer of saturated acyl moieties from the 4'-phosphopantetheine thiol to the active site cysteine thiol, Cys-161, is an inherent property of the beta-ketoacyl synthase domain. Catalytic efficiency of the interthiol transferase increases from C2 to C12 and decreases with increasing chain-lengths beyond C12. Malonyl, beta-hydroxybutyryl, and crotonyl thioesters are not substrates for the transferase, whereas the beta-ketobutyryl moiety is a poor substrate. These features of the substrate specificity are exactly as predicted for a transferase that fulfills the proposed role in the fatty acid synthase reaction sequence and indicate that this activity plays an important role in determining the overall specificity of the beta-ketoacyl synthase reaction.