Gram-negative bacteria possess an asymmetric outer membrane in which the inner leaflet is composed primarily of phospholipids, while the outer leaflet contains mainly lipopolysaccharide (LPS). LPS forms a structural barrier that protects Gram-negative bacteria from antibiotics and other environmental stressors. LPS is anchored to the outer membrane by lipid A, a unique glucosamine-based saccharolipid. Lipid A biosynthesis is required for bacterial viability and pathogenesis. While most lipid A biosynthetic genes are present in a single copy, one gene, lpxH, encoding a membrane-associated specific UDP-diacylglucosamine hydrolase, is absent in ∼30% of Gram-negative bacteria. We hypothesized that a transformational analogue of lpxH must exist in these organisms. We identified this gene, designated lpxI, in Caulobacter crescentus, and confirmed its ability to cover for a deficiency of lpxH in Eschserichia coli. LpxI lacks homology to any other known enzyme. We over-expressed LpxI, purified it, and obtained protein crystals. We solved the X-ray crystal structure of this peripheral membrane enzyme using a single-wavelength anomalous dispersion (SAD) dataset collected on Se-Met derivatized protein. The structural data reveal two domains, each having a novel fold. Unexpectedly, “apo” LpxI co-purified and co-crystallized stoichiometrically with its product, diacylglucosamine-1-phosphate (lipid X), the saccharolipid precursor of lipid A. We then identified and determined the 2.5 A X-ray crystal structure of an inactive point mutant of Caulobacter crescentus LpxI, which co-purified in a stoichiometric ratio with its substrate, UDP-2,3-diacyglucosamine. The conformation of substrate-liganded LpxI differs significantly from the product -liganded wild-type enzyme. Taken together with analytical unltracentrifugation data, this observation suggests that large-scale domain re-arrangement occurs during LpxI substrate binding and/or catalysis. These data provide an interesting example of lipid-protein interaction, and set the stage for additional structural and mechanistic work.