Heparan sulfate (HS) is degraded in lysosome by a series of glycosidases. Before the glycosidases can act, the terminal glucosamine of HS must be acetylated by the integral lysosomal membrane enzyme heparan-α-glucosaminide N-acetyltransferase (HGSNAT). Mutations of HGSNAT cause HS accumulation and consequently mucopolysaccharidosis IIIC, a devastating lysosomal storage disease characterized by progressive neurological deterioration and early death where no treatment is available. HGSNAT catalyzes a unique transmembrane acetylation reaction where the acetyl group of cytosolic acetyl-CoA is transported across the lysosomal membrane and attached to HS in one reaction. However, the reaction mechanism remains elusive. Here we report six cryo-EM structures of HGSNAT along the reaction pathway. These structures reveal a dimer arrangement and a unique structural fold, which enables the elucidation of the reaction mechanism. We find that a central pore within each monomer traverses the membrane and controls access of cytosolic acetyl-CoA to the active site at its luminal mouth where glucosamine binds. A histidine-aspartic acid catalytic dyad catalyzes the transfer reaction via a ternary complex mechanism. Furthermore, the structures allow the mapping of disease-causing variants and reveal their potential impact on the function, thus creating a framework to guide structure-based drug discovery efforts.