Heparin has a higher content of N-sulfated glucosamine and L-iduronic acid than heparan sulfate. Deacetylation of N-acetylglucosamine followed by N-sulfation may be important steps differentiating the biosynthesis of these glycosaminoglycans. We have cloned, by cross-hybridization with the cDNA from rat liver heparan sulfate N-deacetylase/N-sulfotransferase, a protein from a heparin synthesizing mastocytoma derived cell line called MST. This protein, which has both N-deacetylase/N-sulfotransferase activities, has a predicted amino acid sequence homology of 70% with the above rat liver enzyme and is unique for the following reasons. 1) It was found to be encoded by a 3.8-kilobase mRNA that was unique to heparin-producing cells; an 8.5-kilobase mRNA encoding the rat liver enzymes has been found to occur in all mammalian cells tested on the basis of nucleic acid cross-hybridization; 2) the protein overexpressed in COS cells in its full-length transmembrane form or as a soluble secreted protein A chimera displayed ratios of N-deacetylase to N-sulfotransferase activities that were 4-8-fold higher than that observed for the enzyme found in liver that is involved in the biosynthesis of heparan sulfate. These results suggest that the MST-derived enzyme is probably unique to the production of heparin in mast cells.