D-serine is a physiological coagonist of N-methyl D-aspartate receptors (NMDARs) that plays a major role in several NMDAR-dependent events. In this study we investigate mechanisms regulating D-serine production by the enzyme serine racemase (SR). We now report that NMDAR activation promotes translocation of SR to the plasma membrane, which dramatically reduces the enzyme activity. Membrane-bound SR isolated from rat brain is not extracted from the membrane by high detergent and salt concentration, indicating a strong association. Colocalization studies indicate that most membrane-bound SR is located at the plasma membrane and dendrites, with much less SR observed in other types of membrane. NMDAR activation promotes translocation of the cytosolic SR to the membrane, resulting in reduced D-serine synthesis, and this effect is averted by blockade of NMDARs. In primary neuronal cultures, SR translocation to the membrane is blocked by a palmitoylation inhibitor, indicating that membrane binding is mediated by fatty acid acylation of SR. In agreement, we found that SR is acylated in transfected neuroblastoma cells using [(3)H]palmitate or [(3)H]octanoic acid as precursors. In contrast to classical S-palmitoylation of cysteines, acylation of SR occurs through the formation of an oxyester bond with serine or threonine residues. In addition, we show that phosphorylation of Thr-227 is also required for steady-state binding of SR to the membrane under basal, nonstimulated condition. We propose that the inhibition of D-serine synthesis caused by translocation of SR to the membrane provides a fail-safe mechanism to prevent NMDAR overactivation in vicinal cells or synapses.