The lipid A residues of certain Gram-negative bacteria, including most strains of Salmonella and Pseudomonas, are esterified with one or two secondary S-2-hydroxyacyl chains. The S-2 hydroxylation process is O 2-dependent in vivo, but the relevant enzymatic pathways have not been fully characterized because in vitro assays have not been developed. We previously reported that expression of the Salmonella lpxO gene confers upon Escherichia coli K-12 the ability to synthesize 2-hydroxymyristate modified lipid A ( J. Biol. Chem. (2000) 275, 32940-32949). We now demonstrate that inactivation of lpxO, which encodes a putative Fe (2+)/O 2/alpha-ketoglutarate-dependent dioxygenase, abolishes S-2-hydroxymyristate formation in S. typhimurium. Membranes of E. coli strains expressing lpxO are able to hydroxylate Kdo 2-[4'- (32)P]-lipid A in vitro in the presence of Fe (2+), O 2, alpha-ketoglutarate, ascorbate, and Triton X-100. The Fe (2+) chelator 2,2'-bipyridyl inhibits the reaction. The product generated in vitro is a monohydroxylated Kdo 2-lipid A derivative. The [4'- (32)P]-lipid A released by mild acid hydrolysis from the in vitro product migrates with authentic S-2-hydroxlyated lipid A isolated from (32)P-labeled S. typhimurium cells. Electrospray ionization mass spectrometry and gas chromatography/mass spectrometry of the in vitro product are consistent with the 2-hydroxylation of the 3'-secondary myristoyl chain of Kdo 2-lipid A. LpxO contains two predicted trans-membrane helices (one at each end of the protein), and its active site likely faces the cytoplasm. LpxO is an unusual example of an integral membrane protein that is a member of the Fe (2+)/O 2/alpha-ketoglutarate-dependent dioxygenase family.