The biosynthesis of glycosylphosphatidylinositol (GPI) in mammals and yeast involves a step not observed in trypanosomes. This reaction, which is the inositol acylation of glucosamine phosphatidylinositol (GlcN-PI), occurs as the third step in the biosynthetic pathway. In this study, conditions were developed to stimulate this reaction in vitro. The synthesis of the GlcN-PI(acyl) from either UDP-[6-3H]GlcNAc or [6-3H] GlcNAc-PI by murine lymphoma cell microsomes was greatly enhanced by the addition of either CoA or palmitoyl-CoA. Stimulation of this reaction was optimal with 1 microM of either compound and required that the precursor, GlcN-PI, be synthesized in the presence of GTP, a specific effector of the formation of this glycolipid. That GlcN-PI(acyl) was generated from GlcN-PI was established by pulse-chase analysis. Because no acyl-chain specificity for acyl-CoA stimulation of GlcN-PI(acyl) synthesis was found and attempts to demonstrate direct transfer of [3H]palmitate from [3H]palmitoyl-CoA to the third intermediate in GPI biosynthesis were unsuccessful, the possibility that free CoA was the activator of this reaction was considered. CoA-stimulated GlcN-PI acylation occurred in the absence of ATP, an essential cofactor for acyl-CoA synthesis, indicating that free CoA is the endogenous effector of the third step in mammalian GPI biosynthesis. This finding is consistent with this inositol acylation being catalyzed by a CoA-dependent transacylase. Mannose-containing GPI intermediates were synthesized in vitro when GDP-mannose was added in the presence of GTP and CoA. Therefore, when effectors of the initial reactions in GPI biosynthesis are included, later steps in this pathway can be studied in mammalian cell-free systems.