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Susceptibility of Mycobacterium tuberculosis to the second-line antitubercular drug thiacetazone (TAC) requires activation by the monoxygenase, EthA. Here, we report isolation of spontaneous mutants in Mycobacterium bovis BCG that are highly resistant to TAC, but carry a functional EthA. Unexpectedly, a majority of the TAC-resistant mutants lacked keto-mycolic acids, which are long-chain fatty acids associated with the cell wall and which contribute significantly to the physiopathology of tuberculosis. Predictably, causative mutations in the above mutants were in the gene encoding methyltransferase MmaA4, which is required for synthesis of keto- and methoxy-mycolic acids. Drug-resistant phenotype of the BCG mutants was reproduced in a mmaA4, but not in a mmaA3 null mutant of M. tuberculosis CDC1551. Susceptibility to TAC could be restored by complementation with a functional mmaA4 gene. Interestingly, overexpression of MmaA4 in M. bovis BCG made it more susceptible to TAC. We provide novel mechanistic insights into antitubercular drug activation by co-ordinated actions of EthA and MmaA4. This study is the first demonstration of the participation of an enzyme linked to the synthesis of oxygenated mycolates in a drug activation process in M. tuberculosis, and highlights the interplay between mycolic acid synthesis, drug activation and mycobacterial virulence.