The Arabidopsis FAE1 beta-ketoacyl-CoA synthase (FAE1 KCS) catalyzes the condensation of malonyl-CoA with long-chain acyl-CoAs. Sequence analysis of FAE1 KCS predicted that this condensing enzyme is anchored to a membrane by two adjacent N-terminal membrane-spanning domains. In order to characterize the FAE1 KCS and analyze its mechanism, FAE1 KCS and its mutants were engineered with a His6-tag at their N-terminus, and expressed in Saccharomyces cerevisiae. The membrane-bound enzyme was then solubilized and purified to near homogeneity on a metal affinity column. Wild-type recombinant FAE1 KCS was active with several acyl-CoA substrates, with highest activity towards saturated and monounsaturated C16 and C18. In the absence of an acyl-CoA substrate, FAE1 KCS was unable to carry out decarboxylation of [3-(14)C]malonyl-CoA, indicating that it requires binding of the acyl-CoA for decarboxylation activity. Site-directed mutagenesis was carried out on the FAE1 KCS to assess if this condensing enzyme was mechanistically related to the well characterized soluble condensing enzymes of fatty acid and flavonoid syntheses. A C223A mutant enzyme lacking the acylation site was unable to carry out decarboxylation of malonyl-CoA even when 18:1-CoA was present. Mutational analyses of the conserved Asn424 and His391 residues indicated the importance of these residues for FAE1-KCS activity. The results presented here provide the initial analysis of the reaction mechanism for a membrane-bound condensing enzyme from any source and provide evidence for a mechanism similar to the soluble condensing enzymes.