Positional specificities in donor and acceptor phospholipids of the lysosomal phosphatidylcholine: bis(monoacylglycero)phosphate acyltransferase have been determined. Comparison of the transfer of labelled fatty acid from sn-1 [14C]acyl and sn-2 [14C]acylphosphatidylcholines by extracts of rat liver lysosomes revealed that fatty acids in the sn-1 position were exclusively transferred. Degradation of the acylphosphatidylglycerol product by Rhizopus arrhizus lipase, highly specific for fatty acids esterified to sn-1 or sn-3 positions, indicated that sn-1 or sn-3 rather than sn-2 positions had been acylated. Assays of phospholipase A1, phosphatidylcholine: bis(monoacylglycero)phosphate acyltransferase, the conversion of lysophosphatidylglycerol to bis(monoacylglycero)phosphate and phospholipase A2 were performed at various steps in the purification of lysosomal phospholipase A1. After the penultimate step of chromatofocusing, there was a 1086-fold increase of phospholipase A1 specific activity over the homogenate and this was accompanied by a 11 998-fold increase of phosphatidylcholine: bis(monoacylglycero)phosphate acyltransferase specific activity. A second preparation carried through to the final step of gel-filtration retained a similar ratio of acyltransferase activity. On the other hand, specific activities of phospholipase A2 and of the conversion of lysophosphatidylglycerol to bis(monoacylglycero)phosphate increased to the step where enzyme was solubilized from lysosomes, but were lost from later steps. These findings suggest that phosphatidylcholine: bis(monoacylglycero)phosphate acyltransferase is catalyzed by lysosomal phospholipase A1. The site of acylation in the bis(monoacylglycero)phosphate acceptor appears to be either sn-1 or sn-3. Since the lysosomal extracts did not catalyze the transacylation of phosphatidylglycerol, we conclude that the formation of acylphosphatidylglycerol in lysosomes requires the sequential acylation of lysophosphatidylglycerol to form bis(monoacylglycero)phosphate by an unidentified enzymatic mechanism followed by a transacylation of bis(monoacylglycero)phosphate in either sn-1 or sn-3 position to form acylphosphatidylglycerol which is catalyzed by phospholipase A1.