Precursors of the type IV pilins of a number of bacterial pathogens, as well as related proteins involved in extracellular protein export and DNA uptake, are synthesized with short basic leader sequences. Maturation of these proteins involves two consecutive posttranslational modifications. The leader sequence is first proteolytically removed by specialized endopeptidases, of which the prototype is encoded by the pilD gene of Pseudomonas aeruginosa. Subsequently, the amino termini of these proteins are methylated. Here we demonstrate that PilD, in addition to cleaving the amino-terminal leader sequences of prepilin, also catalyzes N-methylation of the amino-terminal phenylalanine of the mature pilin, using S-adenosyl-L-methionine as a methyl donor. Thus, to our knowledge, PilD is the first characterized bacterial N-methyltransferase. Complete inhibition of N-methylation, but not peptide cleavage, by structural analogues of S-adenosyl-L-methionine suggests that PilD is a bifunctional enzyme with proteolytic and methylation activities carried out within two distinct active sites.