The transglutaminase 1 (TGase 1) enzyme is involved in the formation of a cornified cell envelope in terminally differentiating epidermal keratinocytes. The enzyme is present in proliferating cells but is more abundantly expressed in differentiating cells and exists in several intact or proteolytically processed cytosolic or membrane-anchored forms. We show here that the equilibrium partitioning of TGase 1 between the cytosol and membranes is controlled by variable modification by myristate and palmitate. During synthesis, it is constitutively N-myristoylated. Later, it is modified by an average of two S-myristoyl adducts in proliferating cells or one S-palmitoyl adduct in differentiating cells. The three myristoyl adducts of the former provide more robust anchorage to membranes than the one myristoyl and one palmitoyl adduct of the latter. The half-lives of the S-myristoyl and especially the S-palmitoyl adducts are less than that of the TGase 1 protein, suggesting a mechanism for cycling off membranes. In in vitro overlay assays, the S-acylated 10-kDa anchorage fragment facilitates binding of TGase 1 forms, supporting a mechanism of cycling back onto membranes in vivo. We conclude that differential acylation increases the repertoire of functional TGase 1 forms, depending on the differentiation state of epidermal keratinocytes.