Lipoproteins are important for bacterial growth and antibiotic resistance. These proteins use lipid acyl chains attached to the N-terminal cysteine residue to anchor on the outer surface of cytoplasmic membrane. In Gram-negative bacteria, many lipoproteins are transported to the outer membrane (OM), a process dependent on the ATP-binding cassette (ABC) transporter LolCDE which extracts the OM-targeted lipoproteins from the cytoplasmic membrane. Lipid-anchored proteins pose a unique challenge for transport machinery as they have both hydrophobic lipid moieties and soluble protein component, and the underlying mechanism is poorly understood. Here we determined the cryo-EM structures of nanodisc-embedded LolCDE in the nucleotide-free and nucleotide-bound states at 3.8-A and 3.5-A resolution, respectively. The structural analyses, together with biochemical and mutagenesis studies, uncover how LolCDE recognizes its substrate by interacting with the lipid and N-terminal peptide moieties of the lipoprotein, and identify the amide-linked acyl chain as the key element for LolCDE interaction. Upon nucleotide binding, the transmembrane helices and the periplasmic domains of LolCDE undergo large-scale, asymmetric movements, resulting in extrusion of the captured lipoprotein. Comparison of LolCDE and MacB reveals the conserved mechanism of type VII ABC transporters and emphasizes the unique properties of LolCDE as a molecule extruder of triacylated lipoproteins.