• Incubation of N-hydroxy-2-acetylaminofluorene or N-hydroxy-4-acetylaminobiphenyl with N-hydroxy-2-aminofluorene or N-hydroxy-4-aminobiphenyl, rat liver cytosol, and N-acetylmethionine yields 3-methylmercapto-2-aminofluorene or 3-methylmercapto-4-aminobiphenyl. The apparent mechanism is a transacetylation from the hydroxamic acid to the hydroxylamine to yield an N-acetoxyaminoarene. The latter compound then reacts with N-acetylmethionine to yield a sulfonium derivative which decomposes to the methylmercaptoaminoarene. This formulation of the mechanism is supported by the finding that the same methylmercaptoaminoarenes are formed on incubation at neutrality of the hydroxylamines with acetic anhydride and N-acetylmethionine. The same reactions, both with the enzymatic system and with acetic anhydride, have been observed with certain other arylhydroxylamines. In each case with the acetic anhydride system and in two cases with the enzymatic system the products have been isolated by thick-layer chromatography and characterized by their mass spectra. Substitution of guanosine as the nucleophilic reactant in the transacetylase system with N-hydroxy-2-acetylaminofluorene and N-hydroxy-2-aminofluorene resulted in the formation of guanosin-8-yl-2-aminofluorene. • The transacetylase activity of rat liver is localized in the cytosol fraction (105000 × g supernatant) and is eluted at pH 7.4 shortly after the break-through peak upon chromatography on Sephadex G-75. The activity is maximal at pH 6.8 and is inhibited by thiol reagents. The activity is reduced to less than 10% by dialysis, and most of the activity can be restored by addition of pyridine nucleotides or cysteine. The increase in activity on addition of pyridine nucleotides to fresh undialyzed preparations is variable and usually does not exceed 20%. Of the compounds tested, aromatic hydroxamic acids were the only effective sources of acetyl groups; the highest yields of methylmercaptoaminoarenes were obtained with N-hydroxy -4-acetylaminobiphenyl or N-hydroxy-2-acetylaminofluorene as the acetyl donor. • This hepatic transacetylase activity was observed in rat, hamster and rabbit liver. Little or no activity was found with mouse, guinea pig, dog or human ( post-mortem) liver. The activity in rat liver decreased on administration of N-hydroxy-2-acetylaminofluorene; the enyzme activity was not affected by the oral administration of phenobarbital to rats. • The possible identity of this enzyme system with that studied by Booth ((1966) Biochem. J. 100, 745–753) and its possible role in the formation of bound 2-amino-fluorene derivatives on administration of N-hydroxy-2-acetylaminofluorene are discussed.