NH2-terminal glycine myristyl acylation is a cotranslational modification that affects both protein localization and function. However, several proteins that lack NH2-terminal glycine residues, including the interleukin 1 (IL-1) precursors, also contain covalently linked myristate. To date, the site(s) of acylation of these proteins has not been determined. During an evaluation of IL-1 acylation, it was observed that [3H]myristate-labeled human monocyte lysates contained a prominent 26-kD myristylated protein, which was identified as the tumor necrosis factor alpha (TNF) precursor protein on the basis of specific immune precipitation. Radioimmunoprecipitates from the supernates of labeled monocytes indicated that the processed or mature 17-kD form of TNF does not contain myristate, suggesting that the site of acylation occurs within the 76-amino acid propiece of the precursor molecule. As the TNF precursor does not contain an NH2-terminal glycine, we hypothesized that myristyl acylation occurs on the N-epsilon-NH2 groups of lysine, of which two are present in the propiece (K19K20). Synthetic peptides were designed to include all seven lysine residues present within the entire 26-kD TNF precursor, and used in an in vitro myristyl acylation assay containing peptide, myristyl-CoA, and monocyte lysate as a source of enzyme. Analysis of reaction products by reverse phase high performance liquid chromatography and gas phase sequencing demonstrated the exclusive myristyl acylation of K19 and K20, consistent with the presence in monocytes of a specific lysyl N-epsilon- NH2-myristyl transferase activity. The acylated lysine residues are located immediately downstream from a hydrophobic, probable membrane- spanning segment of the propiece. Specific myristyl acylation of the TNF propiece may facilitate membrane insertion or anchoring of this critical inflammatory mediator.