The activity of acetyltransferase was detected in the microsomal fraction of rat liver by incubation with [3H]acetyl-CoA and by analyses using sodium dodecyl sulfate - polyacrylamide gel electrophoresis. Endogenous membrane proteins of relatively high molecular weight were found to serve as substrates. Optimal conditions for assay of the enzyme were defined. A deacetylase activity was also detected, which was inhibited by 2 mM ethylenediaminetetraacetic acid. Further subfractionation disclosed that the acetyltransferase activity was most enriched in the Golgi fraction, in which its specific activity was some ninefold greater than in the total homogenate. The radioactive labelling of Golgi-associated proteins observed was relatively intense, exceeding that of histone and ribosomal proteins in the homogenate. Analysis of the acetylated Golgi fraction by two-dimensional electrophoresis revealed approximately 90 radioactive polypeptides. Various treatments demonstrated that a minimum of 80% of the incorporated radioactivity was present as derivatives of N-acetylneuraminic acid, principally N-acetyl-9-mono-O-acetylneuraminic acid (Neu5,9Ac2). The sialic acid O-acetyltransferase activity detected is thus probably identical to that reported by Varki and Diaz; the intense labelling of proteins reflects the ability of Golgi apparatus fractions to take up and concentrate acetyl-CoA. Protein-bound radioactive Neu5,9Ac2 was also detected in the medium of hepatocytes incubated with N-[3H]acetylmannosamine, demonstrating that these cells synthesize certain proteins containing acetylated sialic acids, some of which may be secreted. The data confirm that the Golgi apparatus is a major site of acetylation of protein-bound sialic acids in rat liver in vitro and provide new information showing that many glycoproteins undergo this particular type of modification.