The biosynthesis of phospholipids and glycolipids are critical pathways for virtually all cell membranes. PatA is an essential membrane associated acyltransferase involved in the biosynthesis of mycobacterial phosphatidyl-myo-inositol mannosides (PIMs). The enzyme transfers a palmitoyl moiety from palmitoyl-CoA to the 6-position of the mannose ring linked to 2-position of inositol in PIM1/PIM2. We report here the crystal structures of PatA from Mycobacterium smegmatis in the presence of its naturally occurring acyl donor palmitate and a nonhydrolyzable palmitoyl-CoA analog. The structures reveal an α/β architecture, with the acyl chain deeply buried into a hydrophobic pocket that runs perpendicular to a long groove where the active site is located. Enzyme catalysis is mediated by an unprecedented charge relay system, which markedly diverges from the canonical HX4D motif. Our studies establish the mechanistic basis of substrate/membrane recognition and catalysis for an important family of acyltransferases, providing exciting possibilities for inhibitor design.