Xylans are a major component of plant cell walls. O-Acetyl moieties are the dominant backbone substituents of glucuronoxylan in dicots and play a major role in the polymer-polymer interactions that are crucial for wall architecture and normal plant development. Here, we describe the biochemical, structural, and mechanistic characterization of Arabidopsis thaliana xylan O-acetyltransferase 1 (XOAT1), a member of the plant-specific Trichome Birefringence Like (TBL) family. Detailed characterization of XOAT1-catalyzed reactions by real-time NMR confirm that it exclusively catalyzes the 2-O-acetylation of xylan, followed by non-enzymatic acetyl migration to the O-3 position, resulting in products that are monoacetylated at both O-2 and O-3 positions. In addition, we report the crystal structure of the catalytic domain of XOAT1, which adopts a unique conformation that bears some similarities to the α/β/α topology of members of the GDSL-like lipase/acylhydrolase family. Finally, we use a combination of biochemical analyses, mutagenesis, and molecular simulations to show that XOAT1 catalyzes xylan acetylation through formation of an acyl-enzyme intermediate, Ac–Ser-216, by a double displacement bi-bi mechanism involving a Ser-His-Asp catalytic triad and unconventionally employs an Arg residue in the formation of an oxyanion hole.