Heparan sulfate polymerization and modification take place in the Golgi compartment. The modification reactions are initiated by glucosaminyl N-deacetylase/N-sulfotransferase (NDST), a bifunctional enzyme that removes N-acetyl groups from selected N-acetyl-d-glucosamine units followed by N-sulfation of the generated free amino groups. Four isoforms of NDST have been identified. NDST-1 and -2 have a wide and largely overlapping tissue distribution, but it is not known if they can act on the same heparan sulfate chain. We have introduced point mutations into NDST-1 cDNA, which selectively destroy the N-deacetylase or N-sulfotransferase activity of the enzyme [Wei, Z., and Swiedler, S. J. (1999) J. Biol. Chem. 274, 1966-70 and Sueyoshi, T., et al. (1998) FEBS Lett. 433, 211-4]. Stable 293 cell lines expressing the NDST-1 mutants were then generated. Structural analyses of heparan sulfate synthesized by these cells and by cells overexpressing wild-type NDST-1 demonstrate that the N-deacetylation step is not only prerequisite but also rate-limiting, determining the degree of N-sulfation. Transfection of mutant NDST-1 lacking N-deacetylase activity had no effect on heparan sulfate sulfation, while cells expressing wild-type enzyme or NDST-1 lacking N-sulfotransferase activity both resulted in the production of oversulfated heparan sulfate. Since no increase in the amount of N-unsubstituted glucosamine residues was seen after transfection of the mutant lacking N-sulfotransferase activity, the results also suggest that two different enzyme molecules can act on the same glucosamine unit. In addition, we show that oversulfation of heparan sulfate produced by cells tranfected with wild-type NDST-1 or the mutant lacking N-sulfotranferase activity results in decreased sulfation of chondroitin sulfate.