Newly synthesized acid hydrolases, destined for transport to lysosomes, acquire a phosphomannosyl targeting signal by the transfer of N-acetylglucosamine 1-phosphate from uridine 5'-diphosphate (UDP)-N-acetylglucosamine to a mannose residue of the acid hydrolase followed by removal of the outer, phosphodiester-linked N-acetylglucosamine to expose 6-phosphomannose. This study demonstrates that fibroblasts from patients with the lysosomal enzyme storage diseases, I-cell disease (mucolipidosis II) and pseudo-Hurler polydystrophy (mucolipidosis III), are severely deficient in UDP-N-acetylglucosamine:glycoprotein N-acetylglucosaminylphosphotransferase, the first enzyme of the sequence. The N-acetylglucosaminylphosphotransferase activity (assayed using endogenous acceptors) in cultures from six normal subjects ranged from 0.67 to 1.46 pmol N-acetylglucosamine-1-phosphate transferred/mg protein per h, whereas five pseudo-Hurler polydystrophy and five I-cell disease cultures transferred less than 0.02 pmol/mg protein per h. The activity in five other pseudo-Hurler cultures ranged from 0.02 to 0.27 pmol transferred/mg protein per h. The activity of alpha-N-acetylglucosaminyl phosphodiesterase, the enzyme responsible for phosphomonoester exposure, is normal or elevated in cultured fibroblasts from both I-cell disease and pseudo-Hurler polydystrophy patients. The deficiency of UDP-N-acetylglucosamine:glycoprotein N-acetylglucosaminylphosphotransferase explains the biochemical abnormalities previously observed in I-cell disease and pseudo-Hurler polydystrophy.