Arylsulfatase A belongs to the sulfatase family whose members carry a C␣-formylglycine that is post-translationally generated by oxidation of a conserved cysteine or serine residue. The formylglycine acts as an aldehyde hydrate with two geminal hydroxyls being involved in catalysis of sulfate ester cleavage. In arylsulfatase A and N-acetylgalactosamine 4-sulfatase this formylglycine was found to form the active site together with a divalent cation and a number of polar residues, tightly interconnected by a net of hydrogen bonds. Most of these putative active site residues are highly conserved among the eukaryotic and prokaryotic members Mammalian sulfatases are involved in the degradation of sulfated substrates like mucopolysaccharides, cerebroside sulfates, and sulfated steroids. The key residue for catalytic activity in sulfate ester cleavage has recently been shown to be a C␣-formylglycine (FGly; Refs. 1 and 2), 1 which is post-translationally generated from a cysteine in the endoplasmic reticulum (3). Failure of this amino acid modification leaves newly synthesized sulfatases inactive and is the cause of multiple sulfatase deficiency, a rare but fatal lysosomal storage disorder (Ref. 1; reviewed in Refs. 4 and 5). X-ray determination of the three-dimensional structures of two human sulfatases, arylsulfatase A (ASA; Ref. 6) and N-acetylgalactosamine 4-sulfatase (arylsulfatase B, ASB; Ref. 7), revealed that the FGly residue is buried at the bottom of a cavity that is formed by positively and negatively charged amino acids. This cavity proved to be the active site by two lines of evidence. Cocrystallization of ASB with vanadate, a potent inhibitor of ASB, revealed that vanadate was covalently bound to FGly (7). In addition, an ASA mutant containing serine instead of FGly was found to be covalently sulfated at the position of FGly 69 after incubation with sulfate ester (see below and Ref. 8). The 2-fold disordered electron density of FGly was interpreted to be an aldehyde hydrate with two geminal hydroxyls protruding into the lumen of the cavity (6). In close vicinity to the aldehyde hydrate a metal ion (Mg 2ϩ in ASA and Ca 2ϩ in ASB) is complexed by three aspartates and one asparagine. Two lysines, two histidines, and a serine complete the arrangement of residues potentially involved in binding and cleavage of the sulfate group within the active site.These data led to a proposal for the catalytic mechanism of sulfate ester cleavage (6) as follows (Fig. 1). In the first halfcycle, one of the two geminal oxygens of the aldehyde hydrate attacks the sulfur of the sulfate ester leading to a transesterification of the sulfate group onto the aldehyde hydrate. Simultaneously the substrate alcohol is released. In the second halfcycle, sulfate is eliminated from the enzyme-sulfate intermediate by an intramolecular rearrangement induced by the second oxygen. By this "intramolecular hydrolysis" the aldehyde group is regenerated. The essential role of FGly in forming the transient enzyme-sulfate ester has been shown indire...