Phosphatidylserine decarboxylase from Escherichia coli uses a pyruvate group as the enzyme cofactor (Satre, M., and Kennedy, E. P. (1978) J. Biol. Chem. 253, 479-483). Comparison of the DNA sequence of the psd gene with the partial amino acid sequence of the mature gene product suggests that the two nonidentical subunits of the mature enzyme are formed by cleavage of a proenzyme resulting in the conversion of Ser-254 to an amino-terminal pyruvate residue (Li, Q.-X., and Dowhan, W. (1988) J. Biol. Chem. 263, 11516-11522). The cleavage of the wild-type proenzyme occurs rapidly with a half-time on the order of 2 min. When Ser-254 is changed to cysteine (S254C), threonine (S254T), or alanine (S254A) by site-directed mutagenesis, the rate of processing of the proenzyme and the production of the functional enzyme are drastically affected. Proenzymes with S254C or S254T are cleaved with a half-time of around 2-4 h while the S254A proenzyme does not undergo processing. The reduced processing rate for the mutant proenzymes is consistent with less of the functional enzyme being made. Mutants encoding the S254C and S254T protein produce 16 and 2%, respectively, of the activity of the wild-type allele but can still complement a temperature-sensitive mutant in the psd locus. There is no detectable activity or complementation observed with the S254A protein. These results are consistent with the hydroxyl group of Ser-254 playing a critical role in the cleavage of the peptide bond between Gly-253 and Ser-254 of the prophosphatidylserine decarboxylase and support the mechanism proposed by Snell and coworkers (Recsei and Snell (1984) Annul Rev. Biochem. 53, 357-387) for the formation of the prosthetic group of pyruvate-dependent decarboxylases.