Lipoproteins serve diverse functions in the bacterial cell and some are essential for survival. Some lipoproteins are adjuvants eliciting responses from the innate immune system of the host. The growing list of membrane enzymes responsible for lipoprotein synthesis includes the recently discovered lipoprotein intramolecular transacylase, Lit. Lit creates a lipoprotein that is less immunogenic, possibly enabling the bacteria to gain a foothold in the host by stealth. Here, we report the crystal structure of the Lit enzyme from Bacillus cereus and describe its mechanism of action. Lit consists of four transmembrane helices with an extracellular cap. Conserved residues map to the cap-membrane interface. They include two catalytic histidines that function to effect unimolecular transacylation. The reaction involves acyl transfer from the sn-2 position of the glyceryl moiety to the amino group on the N-terminal cysteine of the substrate via an 8-membered ring intermediate. Transacylation takes place in a confined aromatic residue-rich environment that likely evolved to bring distant moieties on the substrate into proximity and proper orientation for catalysis.