Heparan sulfate N-deacetylase/N-sulfotransferase (NDST) catalyzes the deacetylation and sulfation of N-acetyl-D-glucosamine residues of heparan sulfate, a key step in its biosynthesis. Recent crystallographic and mutational studies have identified several potentially catalytic residues of the sulfotransferase domain of this enzyme (, J. Biol. Chem. 274:10673-10676). We have used the x-ray crystal structure of heparan sulfate N-sulfotransferase with 3'-phosphoadenosine 5'-phosphate to build a solution model with cofactor 3'-phosphoadenosine 5'-phosphosulfate (PAPS) and a model heparan sulfate ligand bound, and subsequently performed a 2-ns dynamics solution simulation. The simulation results confirm the importance of residues Glu(642), Lys(614), and Lys(833), with the possible involvement of Thr(617) and Thr(618), in binding PAPS. Additionally, Lys(676) is found in close proximity to the reaction site in our solvated structure. This study illustrates for the first time the possible involvement of water in the catalysis. Three water molecules were found in the binding site, where they are coordinated to PAPS, heparan sulfate, and the catalytic residues.