Palmitoylation is the covalent attachment of fatty acids, such as palmitic acid, to cysteine and less frequently to serine and threonine residues of proteins, which are typically membrane proteins. The precise function of palmitoylation depends on the particular protein being considered. Palmitoylation enhances the hydrophobicity of proteins and contributes to their membrane association. Palmitoylation also appears to play a significant role in subcellular trafficking of proteins between membrane compartments, as well as in modulating protein-protein interactions. In contrast to prenylation and myristoylation, palmitoylation is usually reversible (because the bond between palmitic acid and protein is often a thioester bond). The reverse reaction is catalysed by palmitoyl protein thioesterases. Because palmitoylation is a dynamic, post-translational process, it is believed to be employed by the cell to alter the subcellular localization, protein-protein interactions, or binding capacities of a protein.
An example of a protein that undergoes palmitoylation is hemagglutinin, a membrane glycoprotein used by influenza to attach to host cell receptors. The palmitoylation cycles of a wide array of enzymes have been characterized in the past few years, including H-Ras, Gsα, the β2-adrenergic receptor, and endothelial nitric oxide synthase (eNOS). Another example is the major signaling protein Wnt, which is modified by a palmitoleoyl group at a serine. This is a type of O-acylation and is mediated by a membrane-bound O-acyltransferase. In signal transduction via G protein, palmitoylation of the α subunit, prenylation of the γ subunit, and myristoylation is involved in tethering the G protein to the inner surface of the plasma membrane so that the G protein can interact with its receptor. 
Palmitoylation in synaptic plasticity
Scientists have appreciated the significance of attaching long hydrophobic chains to specific proteins in cell signaling pathways. A good example of its significance is in the clustering of proteins in the synapse. A major mediator of protein clustering in the synapse is the postsynaptic density (95kD) protein PSD-95. When this protein is palmitoylated it is restricted to the membrane. This restriction to the membrane allows it to bind to and cluster ion channels in the postsynaptic membrane. Also, in the presynaptic neuron, palmitoylation of SNAP-25 allows the SNARE complex to dissociate during vesicle fusion. This provides a role for palmitoylation in regulating neurotransmitter release.
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