Vancomycin resistance in Enterococcus faecium BM4147 is mediated by vancomycin resistance proteins VanA and VanH. VanA is a D-alanine:D-alanine ligase of altered substrate specificity [Bugg, T. D. H., Dutka-Malen, S., Arthur, M., Courvalin, P., & Walsh, C. T. (1991) Biochemistry 30, 2017-2021], while the sequence of VanH is related to those of alpha-keto acid dehydrogenases [Arthur, M., Molinas, C., Dutka-Malen, S., & Courvalin, P. (1991) Gene (submitted)]. We report purification of VanH to homogeneity, characterization as a D-specific alpha-keto acid dehydrogenase, and comparison with D-lactate dehydrogenases from Leuconostoc mesenteroides and Lactobacillus leichmanii. VanA was found to catalyze ester bond formation between D-alanine and the D-hydroxy acid products of VanH, the best substrate being D-2-hydroxybutyrate (Km = 0.60 mM). The VanA product D-alanyl-D-2-hydroxybutyrate could then be incorporated into the UDPMurNAc-pentapeptide peptidoglycan precursor by D-Ala-D-Ala adding enzyme from Escherichia coli or by crude extract from E. faecium BM4147. The vancomycin binding constant of a synthetic modified peptidoglycan analogue N-acetyl-D-alanyl-D-2-hydroxybutyrate (Kd greater than 73 mM) was greater than 1000-fold higher than the binding constant for N-acetyl-D-alanyl-D-alanine (Kd = 54 microM), partly due to the disruption of a hydrogen bond in the vancomycin-target complex, thus providing a molecular rationale for high-level vancomycin resistance.