Burkholderia cenocepacia is an important opportunistic pathogen, and one of the most striking features of the Burkholderia genus is the collection of polar lipids present in its membrane, including phosphatidylethanolamine (PE) and ornithine-containing lipids (OLs), as well as the 2-hydroxylated derivatives of PE and OLs (2-OH-PE and 2-OH-OLs, respectively), which differ from the standard versions by virtue of the presence of a hydroxyl group at C2 (2-OH) of an esterified fatty acyl residue. Similarly, a lipid A-esterified myristoyl group from Salmonella typhimurium can have a 2-hydroxy modification that is due to the LpxO enzyme. We thus postulated that 2-hydroxylation of 2-OH-OLs might be catalyzed by a novel dioxygenase homologue of LpxO. In B. cenocepacia, we have now identified two open reading frames (BCAM1214 and BCAM2401) homologous to LpxO from S. typhimurium. The introduction of bcam2401 (designated olsD) into Sinorhizobium meliloti leads to the formation of one new lipid and in B. cenocepacia of two new lipids. Surprisingly, the lipid modifications on OLs due to OlsD occur on the amide-linked fatty acyl chain. This is the first report of a hydroxyl modification of OLs on the amide-linked fatty acyl moiety. Formation of hydroxylated OLs occurs only when the biosynthesis pathway for nonmodified standard OLs is intact. The hydroxyl modification of OLs on the amide-linked fatty acyl moiety occurs only under acid stress conditions. An assay has been developed for the OlsD dioxygenase, and an initial characterization of the enzyme is presented.