One of the major lipids in the membranes of Borrelia burgdorferi is monogalactosyl diacylglycerol (MGalDAG), a glycolipid recently shown to carry antigenic potency. Herein, it is shown that the gene mgs (TIGR designation bb0454) of B. burgdorferi encodes for the protein bbMGS that, when expressed in Escherichia coli, catalyzes the glycosylation of 1,2-diacylglycerol with specificity for the donor substrate UDP-Gal yielding MGalDAG. Related lipid enzymes were found in many Gram-positive bacteria. The presence of this galactosyltransferase activity and synthesis of a cholesteryl galactoside by another enzyme were verified in B. burgdorferi cell extract. Besides MGalDAG, phosphatidylcholine, phosphatidylglycerol, and cholesterol were also found as major lipids in the cell envelope. The high isoelectric point of bbMGS and clustered basic residues in its amino acid sequence suggest that the enzyme interacts with acidic lipids in the plasma membrane, in agreement with strong enzymatic activation of bbMGS by phosphatidylglycerol. The membrane packing and immunological properties of MGalDAG are likely to be of great importance in vivo.