DHHC (Asp-His-His-Cys) palmitoyltransferases are eukaryotic integral membrane enzymes that catalyze protein palmitoylation, which is important in a range of physiological processes, including small guanosine triphosphatase (GTPase) signaling, cell adhesion, and neuronal receptor scaffolding. We present crystal structures of two DHHC palmitoyltransferases and a covalent intermediate mimic. The active site resides at the membrane-cytosol interface, which allows the enzyme to catalyze thioester-exchange chemistry by using fatty acyl-coenzyme A and explains why membrane-proximal cysteines are candidates for palmitoylation. The acyl chain binds in a cavity formed by the transmembrane domain. We propose a mechanism for acyl chain-length selectivity in DHHC enzymes on the basis of cavity mutants with preferences for shorter and longer acyl chains.