The formylglycine-generating enzyme (FGE) recognizes proteins with a specific cysteine-containing six-amino-acid motif and converts this cysteine residue into formylglycine. The resulting aldehyde function provides a unique handle for selective protein labeling. We have identified two mutations in FGE from Thermomonospora curvata that increase this catalytic efficiency more than 40-fold. The resulting activity and stability, as well as its ease of recombinant production, make this FGE variant a practical reagent for in vitro protein engineering.