LTA cells synthesize a minor population of heparan sulfate proteoglycans (HSPGact) bearing anticoagulant heparan sulfate (HSact) with a specific monosaccharide sequence that accelerates the action of antithrombin (AT). LTA cells also synthesize a major population of heparan sulfate proteoglycans endowed with nonanticoagulant heparan sulfate (HSinact) lacking the AT-binding site. To investigate the pathway-specific features of HSPGact generation, we established a novel detergent-containing cell-free system with unlabeled and labeled microsomes from wild-type and variant LTA cells, respectively. The unlabeled microsomes provide "HSact conversion activity" that requires 3'-phosphoadenosine 5'-phosphosulfate to convert [35S]HSPGinact into [35S] HSPGact, presumably by sulfation. The reaction kinetics demonstrate that the rate of HSact synthesis is constant over the first 4 h of incubation. During this time, the rate of HSact production is linearly dependent on the amount of unlabeled LTA microsomal protein over a range of 10 to 50 microg as well as on the level of [35S]HS substrate over a range of 0.4 to 4.0 microg, microsomal protein. Compared with labeled microsomes, equivalent or slightly greater levels of HSact were generated from 35S-labeled HSPG, microsomal HS, or cell surface HS, which demonstrates that HSinact is the minimal substrate and that large amounts of HSact precursor exit the Golgi apparatus. Indeed, extensive modification of wild-type LTA cell surface [35S]HS elevated HSact content from 9 to 35%. The hypothesis that microsomal HSact conversion activity predicts the cellular rate of HSact generation was tested with wild-type or variant LTA cells in which production of HSact has been significantly altered by mutagenesis or overexpression of core protein or growth conditions. The data demonstrate that microsomal HSact conversion activity accurately reflects the cellular rate of HSact synthesis over a very wide range of conditions. The possibility that the reduced HSact generation is due to an inhibitor was excluded by mixing experiments. The possibility that reduced HSact generation is caused by decreased levels of HSact precursor was excluded as equivalent levels of HSact were formed from wild-type and variant [35S]HS. Based upon the above data, the LTA cell microsomal HSact conversion activity contains one or more limiting components that kinetically regulate the rate of cellular HSact generation and the levels of HSact precursor in HS greatly exceed HSact production.