Glycosaminoglycan N-acetylglucosaminyl N-deacetylases/N-sulfotransferases are structurally related enzymes that play an important role in the biosynthesis of heparan sulfate and heparin. They are dual catalytic, single membrane-spanning polypeptides of approximately 850-880 amino acids that catalyze the N-deacetylation of N-acetylglucosamine of glycosaminoglycans followed by N-sulfation of the same sugar. On the basis of homologies of these proteins with other N-acetylglucosaminyl N-deacetylases involved in the biosynthesis of chitin and putative deacetylases from bacteria, we have constructed two soluble chimeras between protein A and the amino- and carboxyl-terminal halves of the above mastocytoma holoenzyme. The carboxyl-terminal chimera half (amino acids 479-880) was able to catalyze the N-sulfation of glucosamine of heparan sulfate with a similar affinity for its two substrates, adenosine 3'-phosphate 5'-phosphosulfate and heparan sulfate, as the holoenzyme. However, the reaction only occurred at 30 degreesC and not at 37 degreesC, both temperatures at which the holoenzyme was active. The Vmax of the chimera was 10-20-fold slower than that of the holoenzyme. Soluble chimeras between protein A and amino acids 43-521 and 43-680 of the holoenzyme were unable to catalyze the N-deacetylation of the bacterial N-acetylglucosaminyl-glucuronic acid polymer K5 under conditions where the holoenzyme was active. The recent appearance in genome data banks of homologs to the N-sulfotransferase domain and now the direct demonstration that this domain catalyzes this reaction raises the possibility that both N-deacetylation and N-sulfation activities of the holoenzyme might have emerged as gene fusions during evolution.