The enzymatic transfer of acetyl groups from acetylated xenobiotics to specific proteins is a relatively grey area in the evergreen field of biotransformation of foreign compounds. In this paper, we have documented evidence for the existence of a transacetylase in liver microsomes that catalyses the transfer of acetyl groups from 7,8-diacetoxy-4-methylcoumarin (DAMC) to glutathione S-transferase (GST), either purified or present in cytosol leading to the irreversible inhibition of GST. A simple procedure is described for the assay of transacetylase by preincubation of DAMC with liver microsomes and pure GST/liver cytosol, followed by the addition of 1-chloro-2,4-dinitrobenzene (CDNB) and reduced glutathione (GSH) in order to quantify GST activity by the conventional procedure. The extent of inhibition of GST by DAMC under the conditions of the assay is indicative of DAMC:protein transacetylase activity. Following the assay procedure described here, the transacetylase was shown to exhibit hyperbolic kinetics. The bimolecular nature of the transacetylase reaction was apparent by the demonstration of Km and vmax values. 7,8-Dihydroxy-4-methylcoumarin (DHMC), one of the products of transacetylase reaction was identified and quantified using the partially purified enzyme. The fact that p-hydroxymercuribenzoate (PHMB) and iodoacetamide abolished irreversible inhibition of GST upon the action of transacetylase on DAMC strongly characterized transacetylase as a protein containing thiol group at the active site. In addition, the relative specificities of acetoxy 4-methylcoumarins to transacetylase have been demonstrated.