The neurotransmitter GABA activates heteropentameric GABA A receptors, which are composed mostly of ␣, , and ␥2 subunits. Regulated membrane trafficking and subcellular targeting of GABA A receptors is important for determining the efficacy of GABAergic inhibitory function. Of special interest is the ␥2 subunit, which is mostly dispensable for assembly and membrane insertion of functional receptors but essential for accumulation of GABA A receptors at synapses. In a search for novel receptor trafficking proteins, we have used the SOS-recruitment system and isolated a Golgi-specific DHHC zinc finger protein (GODZ) as a novel ␥2 subunit-interacting protein.GODZ is a member of the superfamily of DHHC cysteine-rich domain (DHHC-CRD) polytopic membrane proteins shown recently in yeast to represent palmitoyltransferases. GODZ mRNA is found in many tissues; however, in brain the protein is detected in neurons only and highly concentrated and asymmetrically distributed in the Golgi complex. GODZ interacts with a cysteine-rich 14-amino acid domain conserved specifically in the large cytoplasmic loop of ␥1-3 subunits but not in other GABA A receptor subunits. Coexpression of GODZ and GABA A receptors in heterologous cells results in palmitoylation of the ␥2 subunit in a cytoplasmic loop domain-dependent manner. Neuronal GABA A receptors are similarly palmitoylated. Thus, GODZ-mediated palmitoylation represents a novel posttranslational modification that is selective for ␥ subunit-containing GABA A receptor subtypes, a mechanism that is likely to be important for regulated trafficking of these receptors in the secretory pathway.