Heparan sulfate (HS) proteoglycans influence embryonic development as well as adult physiology through interactions with various proteins, including growth factors/morphogens and their receptors. The interactions depend on HS structure, which is largely determined during biosynthesis by Golgi enzymes. A key step is the initial generation of N-sulfated domains, primary sites for further polymer modification and ultimately for functional interactions with protein ligands. Such domains, generated through action of a bifunctional GlcNAc N-deacetylase/N-sulfotransferase (NDST) on a [GlcUA-GlcNAc](n) substrate, are of variable size due to regulatory mechanisms that remain poorly understood. We have studied the action of recombinant NDSTs on the [GlcUA-GlcNAc](n) precursor in the presence and absence of the sulfate donor, 3'-phosphoadenosine 5'-phosphosulfate (PAPS). In the absence of PAPS, NDST catalyzes limited and seemingly random N-deacetylation of GlcNAc residues. By contrast, access to PAPS shifts the NDST toward generation of extended N-sulfated domains that are formed through coupled N-deacetylation/N-sulfation in an apparent processive mode. Variations in N-substitution pattern could be obtained by varying PAPS concentration or by experimentally segregating the N-deacetylation and N-sulfation steps. We speculate that similar mechanisms may apply also to the regulation of HS biosynthesis in the living cell.