Exogenous radioactive palmitic acid is incorporated post-translationally into the HLA-B and -DR heavy chains, but not HLA-A heavy chains or -DR light chains of the human B lymphoblastoid cells JY and T51 . Protease digestions localize the label to the transmembrane region of the B7 heavy chain. Both B7 and DR heavy chains have a cysteine in the transmembrane hydrophobic region, while the A2 heavy chain and DR light chains have none. Palmitic acid is covalently linked to these transmembrane cysteines via a thioester bond since: 1) the label is not removed by organic extraction or boiling in sodium dodecyl sulfate and dithiothreitol, but is released at room temperature by methanolic KOH as methyl palmitate, and by hydroxylamine as palmitohydroxamate . 2) The pH sensitivity and kinetics of release by hydroxylamine and Tris are similar to those of palmitoyl-CoA (thioester linkage) and unlike those of methyl palmitate and palmitoyllysophosphatidylcholine ( hydroxyester linkages). 3) Neutral hydroxylamine treatment (but not neutral Tris treatment) generates sites that can be reduced and alkylated in the transmembrane region of B7 heavy chain and to a lesser extent in DR heavy chain. 4) Organic extraction of pronase digests of labeled B7 yields peptides containing palmitate and cysteine (but not serine or threonine) which co-migrate by thin layer chromatography. A population of beta 2-microglobulin molecules not associated with heavy chains is palmitylated , but not via a thioester linkage.