Fatty acylation of cysteine residues provides spatial and temporal control of protein function in cells and regulates important biological pathways in eukaryotes. Although recent methods have improved the detection and proteomic analysis of cysteine fatty (S-fatty) acylated proteins, understanding how specific sites and quantitative levels of this posttranslational modification modulate cellular pathways are still challenging. To analyze the endogenous levels of protein S-fatty acylation in cells, we developed a mass-tag labeling method based on hydroxylamine-sensitivity of thioesters and selective maleimide-modification of cysteines, termed acyl-PEG exchange (APE). We demonstrate that APE enables sensitive detection of protein S-acylation levels and is broadly applicable to different classes of S-palmitoylated membrane proteins. Using APE, we show that endogenous interferon-induced transmembrane protein 3 is S-fatty acylated on three cysteine residues and site-specific modification of highly conserved cysteines are crucial for the antiviral activity of this IFN-stimulated immune effector. APE therefore provides a general and sensitive method for analyzing the endogenous levels of protein S-fatty acylation and should facilitate quantitative studies of this regulated and dynamic lipid modification in biological systems.