N-palmitoylation has been reported in a number of proteins and suggested to play an important role in protein localization and functions. However, it remains unclear whether N-palmitoylation is a direct enzyme-catalyzed process, or results from intramolecular S- to N-palmitoyl transfer. Here, using the S-palmitoyl peptide standard, GCpalmLGNAK, as the model system, we observed palmitoyl migration from the cysteine residue to either the peptide N-terminus or the lysine side chain during incubation in both neutral and slightly basic buffers commonly used in proteomic sample preparation. Palmitoyl transfer can take place either intra- or inter-molecularly, with the peptide N-terminus being the preferred migration site, presumably due to its lower basicity. The extent of intramolecular palmitoyl migration was low in the system studied, as it required the formation of an entropically unfavored macrocycle intermediate. Intermolecular palmitoyl transfer, however, remained a tangible problem, and may lead to erroneous reporting of in vivo N-palmitoylation. It was found that addition of the MS-compatible detergent RapiGest could significantly inhibit intermolecular palmitoyl transfer, as well as thioester hydrolysis and DTT-induced thioester cleavage. Finally, palmitoyl transfer from the cysteine residue to the peptide N-terminus can also occur in the gas phase, during collision-induced dissociation, and result in false identification of N-palmitoylation. Therefore, one must be careful with both sample preparation and interpretation of tandem mass spectra in the study of N-palmitoylation.