The substrate specificity of polysome rat liver N alpha-acetyltransferase (NAT) has been examined by utilizing a series of synthetic and natural substrates that has been systematically altered with respect to N-terminal sequence and length. Families of peptides of the structure S-Y-S-G-G-L-L-L were generated by successively replacing the N-terminal serine, the penultimate tyrosine, and the antepenultimate serine with all 19 commonly occurring amino acids, which were then assessed for their reactivity with the rat liver enzyme. Only peptides with N-terminal serine, alanine, methionine, leucine, and phenylalanine were modified. Glycine, lysine, arginine, valine, isoleucine, and tryptophan in the second position are (with N-terminal serine) strongly inhibitory, and proline completely blocks modification. Third-position substitutions have less of an effect on NAT activity with glycine, aspartic acid, glutamic acid, and tryptophan being most inhibiting (with N-terminal Ser-Tyr). These observations are generally in agreement with in situ modifications although there are some significant differences particularly with respect to the amino-terminal residues. Optimal chain length was determined to be 10-11 residues with either synthetic peptides of the structure S-Y-S-(G)n-L-L-L or adrenocorticotropin (ACTH) sequences ranging from 8 to 39 residues. The ACTH peptides were generally found to be severalfold better substrates than the corresponding synthetic ones. Activity was not affected by increased chain length beyond approximately 17 residues. These data support the view that polysome-catalyzed N alpha-acetylation occurs as a cotranslational event on nascent chains of about 20-40 amino acids in length.