All lipo-chitin oligosaccharides identified from Rhizobium leguminosarum carry an O-acetyl moiety on C6 of the nonreducing terminal N-acetylglucosamine residue. Previously, we have shown that purified NodL protein, using acetyl-CoA as acetyl donor, in vitro acetylates N-acetylglucosamine, chitin oligosaccharides, and lipo-chitin oligosaccharides. In this paper, the enzymatic properties and substrate specificity of NodL protein were analyzed, using a spectrophotometric assay to quantify NodL transacetylating activity. NodL functions optimally under alkaline conditions. Transacetylating activity has a broad temperature optimum between 28 and 42 degrees C. NodL protein is stable for at least 15 min up to 48 degrees C. Glucosamine, chitosan oligosaccharides, terminally de-N-acetylated chitin derivatives, and cellopentaose were identified as acetyl-accepting substrates for NodL protein. Quantitative substrate specificity studies show that chitin derivatives with a free amino group on the nonreducing terminal residue are the preferred substrates of the NodL protein. Our results strongly indicate that the nonreducing terminally de-N-acetylated chitin oligosaccharides produced by the NodC and NodB enzymes are the in vivo acetyl-accepting substrates for NodL protein.