Saccharomyces cerevisiae normally requires sphingolipid biosynthesis for growth; however, mutant strains lacking sphingolipids have been isolated by suppression of a genetic defect in sphingolipid long chain base biosynthesis. To begin to understand the nature of the suppressor(s) we isolated and characterized a suppressor gene, SLC1 (sphingolipid compensation). DNA sequence analysis showed that the wild type SLC1 allele differs from the suppressor allele by a single nucleotide which changes Gln-44 in the predicted wild type protein to Leu4-4 in the predicted SLC1-1 suppressor protein. The predicted SLC1 protein sequence is homologous to the 1-acyl-sn-glycerol-3-phosphate acyltransferase of Escherichia coli encoded by the plsC gene. The homology extends to function as well since the SLC1 gene complements the growth defect in an E. coli strain mutated in plsC. These results suggest that the SLC1 protein has a fatty acyltransferase activity. SLC1 thus may be the first eucaryotic sn2-acylglyceride fatty acyltransferase gene to be cloned. SLC strains grown in the absence of long chain base make novel phosphatidylinositol derivatives (Lester, R. L., Wells, G. B., Oxford, G., and Dickson, R. C. (1993) J. Biol. Chem. 268, 845-856) having a C26 fatty acid at the sn-2 position and the same polar head groups as normal sphingolipids. We postulate that the SLC1 suppressor allele encodes a variant enzyme with an altered substrate specificity that enables it to use a C26 in place of a C16/18 fatty acid precursor to acylate the sn-2 position of inositol-containing glycerolipids.