Lipid modification of proteins is an essential post-translational event that can be targeted for protein engineering and pharmaceutical applications. In this regard, the unique and ubiquitous bacterial N-terminal lipid modification (N-acyl S-diacylglyceryl modification of N-terminal cysteine) is particularly attractive. It is initiated by phosphatidylglycerol:prolipoprotein diacylglyceryl transferase (Lgt) and therefore its properties, which remain uninvestigated, largely define the specifics of the modification. A synthetic peptide-substrate (MKATKSAVGSTLAGCSSHHHHHH) with a short hydrophilic h-region, unlike that of the prototypical substrate used so far, demonstrated lack of enzyme's substrate preference based on hydrophobicity, perhaps accounting for a significant number of lipoproteins possessing hydrophilic signal peptides. Solubilization experiments revealed a peripheral and possibly reversible hydrophobic association of Lgt with the inner-membrane on the cytosolic side contradicting its deduced transmembrane topology. Except for heat stability, the soluble enzyme was indistinguishable from the membrane-bound enzyme in kinetic behaviour, indicating that the committed first step of bacterial lipid modification may be aqueous compatible. The direct, more accurate, precise and easier paper electrophoretic assay, designed anew, and Lgt's ready extraction with water or low ionic strength solutions from inverted vesicles could aid better understanding and exploitation of the enzyme and bacterial lipid modification.