Covalent modification of membrane proteins with lipids appears to be ubiquitous in all living cells. The major outer membrane (Braun's) lipoprotein of E. coli, the prototype of bacterial lipoproteins, is first synthesized as a precursor protein. Analysis of signal sequences of 26 distinct lipoprotein precursors has revealed a consensus sequence of lipoprotein modification/processing site of Leu-(Ala, Ser)-(Gly, Ala)-Cys at -3 to +1 positions which would represent the cleavage region of about three-fourth of all lipoprotein signal sequences in bacteria. Unmodified prolipoprotein with the putative consensus sequence undergoes sequential modification and processing reactions catalyzed by glyceryl transferase, O-acyl transferase(s), prolipoprotein signal peptidase (signal peptidase II), and N-acyl transferase to form mature lipoprotein. Like all exported proteins, the export of lipoprotein requires functional SecA, SecY, and SecD proteins. Thus all precursor proteins are exported through a common pathway accessible to both signal peptidase I and signal peptidase II. The rapidly increasing list of lipid-modified proteins in both prokaryotic as well as eukaryotic cells indicates that lipoproteins comprise a diverse group of structurally and functionally distinct proteins. They share a common structural feature which is derived from a common biosynthetic pathway.