beta-1,4-Gatactosyltransferase 7 (beta 4GalT7) is an essential enzyme in the biosynthesis of glycosaminoglycan (GAG) chains of proteoglycans (PGs). Mammalian cells produce PGs, which are involved in biological processes such as cell growth and differentiation. The PGs consist of a core protein, with one or several GAG chains attached. Both the structure of the PGs and the GAG chains, and the expression of the enzymes involved in their biosynthesis and degradation, vary between normal cells and tumor cells. The biosynthesis of GAG chains is initiated by xylosylation of a serine residue of the core protein, followed by galactosylation by beta 4GalT7. The biosynthesis can also be initiated by exogenously added beta-D-xylopyranosides with hydrophobic aglycons, which thus can act as acceptor substrates for beta 4GalT7. To determine the structural requirements for beta 4GalT7 activity, we have cloned and expressed the enzyme and designed a focused library of 2-naphthyl beta-D-xylopyranosides with modifications of the xylose moiety. Based on enzymatic studies, that is galactosylation and its inhibition, conformational analysis and molecular modeling using the crystal structure, we propose that the binding pocket of beta 4GalT7 is very narrow, with a precise set of important hydrogen bonds. Xylose appears to be the optimal acceptor substrate for galactosylation by beta 4GalT7. However, we show that modifications of the xylose moiety of the beta-D-xylopyranosides can render inhibitors of galactosylation. Such compounds will be valuable tools for the exploration of GAG and PG biosynthesis and a starting point for development of anti-tumor agents.