The sequence of the N-terminal end of the deduced ctaC gene product of Bacillus species has the features of a bacterial lipoprotein. CtaC is the subunit II of cytochrome caa3, which is a cytochrome c oxidase. Using Bacillus subtilis mutants blocked in lipoprotein synthesis, we show that CtaC is a lipoprotein and that synthesis of the membrane-bound protein and covalent binding of heme to the cytochrome c domain is not dependent on processing at the N-terminal part of the protein. Mutants blocked in prolipoprotein diacylglyceryl transferase (Lgt) or signal peptidase type II (Lsp) are, however, deficient in cytochrome caa3 enzyme activity. Removal of the signal peptide from the CtaC polypeptide, but not lipid modification, is seemingly required for formation of functional enzyme.