The products of the rhizobial nodulation genes are involved in the biosynthesis of lipochitin oligosaccharides (LCOs), which are host-specific signal molecules required for nodule formation. The presence of an O-acetyl group on C-6 of the nonreducing N-acetylglucosamine residue of LCOs is due to the enzymatic activity of NodL. Here we show that transfer of the nodL gene into four rhizobial species that all normally produce LCOs that are not modified on C-6 of the nonreducing terminal residue results in production of LCOs, the majority of which have an acetyl residue substituted on C-6. Surprisingly, in transconjugant strains of Mesorhizobium loti, Rhizobium etli, and Rhizobium tropici carrying nodL, such acetylation of LCOs prevents the endogenous nodS-dependent transfer of the N-methyl group that is found as a substituent of the acylated nitrogen atom. To study this interference between nodL and nodS, we have cloned the nodS gene of M. loti and used its product in in vitro experiments in combination with purified NodL protein. It has previously been shown that a chitooligosaccharide N deacetylated on the nonreducing terminus (the so-called NodBC metabolite) is the preferred substrate for NodS as well as for NodL. Here we show that the NodBC metabolite, acetylated by NodL, is not used by the NodS protein as a substrate while the NodL protein can acetylate the NodBC metabolite that has been methylated by NodS.