Since its discovery more than 30 years ago, protein palmitoylation has been shown to have a role in protein-membrane interactions, protein trafficking, and enzyme activity. Until recently, however, the molecular machinery that carries out reversible palmitoylation of proteins has been elusive. In fact, both enzymatic and nonenzymatic S-acylation reaction mechanisms have been proposed. Recent reports of protein palmitoyltransferases in Saccharomyces cerevisiae and Drosophila provide the first glimpse of enzymes that carry out protein palmitoylation. Equally important is the mechanism of depalmitoylation. Two major classes of protein palmitoylthioesterases have been described. One family is lysosomal and is involved in protein degradation. The second is cytosolic and removes palmitoyl moieties preferentially from proteins associated with membranes. This review discusses recent advances in the understanding of mechanisms of addition of palmitate to proteins and removal of palmitate from proteins.