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Escherichia coli K1 is a leading cause of neonatal meningitis. The mortality and morbidity of this disease remain significantly high despite antibiotic therapy. ABSTRACT Escherichia coli K1 causes bacteremia and meningitis in human neonates. The K1 capsule, an α2,8-linked polysialic acid (PSA) homopolymer, is its essential virulence factor. PSA is usually partially modified by O-acetyl groups. It is known that O-acetylation alters the antigenicity of PSA, but its impact on the interactions between E. coli K1 and host cells is unclear. In this study, a phase variant was obtained by passage of E. coli K1 parent strain, which expressed a capsule with 44% O-acetylation whereas the capsule of the parent strain has only 3%. The variant strain showed significantly reduced adherence and invasion to macrophage-like cells in comparison to the parent strain. Furthermore, we found that O-acetylation of PSA enhanced the modulation of trafficking of E. coli-containing vacuoles (ECV), enabling them to avoid fusing with lysosomes in these cells. Intriguingly, by using quartz crystal microbalance, we demonstrated that the PSA purified from the parent strain interacted with human sialic acid-binding immunoglobulin-like lectins (Siglecs), including Siglec-5, Siglec-7, Siglec-11, and Siglec-14. However, O-acetylated PSA from the variant interacted much less and also suppressed the production of Siglec-mediated proinflammatory cytokines. The adherence of the parent strain to human macrophage-like cells was significantly blocked by monoclonal antibodies against Siglec-11 and Siglec-14. Furthermore, the variant strain caused increased bacteremia and higher lethality in neonatal mice compared to the parent strain. These data elucidate that O-acetylation of K1 capsule enables E. coli to escape from Siglec-mediated innate immunity and lysosomal degradation; therefore, it is a strategy used by E. coli K1 to regulate its virulence. IMPORTANCE Escherichia coli K1 is a leading cause of neonatal meningitis. The mortality and morbidity of this disease remain significantly high despite antibiotic therapy. One major limitation on advances in prevention and therapy for meningitis is an incomplete understanding of its pathogenesis. E. coli K1 is surrounded by PSA, which is observed to have high-frequency variation of O-acetyl modification. Here, we present an in-depth study of the function of O-acetylation in PSA at each stage of host-pathogen interaction. We found that a high level of O-acetylation significantly interfered with Siglec-mediated bacterial adherence to macrophage-like cells, and blunted the proinflammatory response. Furthermore, the O-acetylation of PSA modulated the trafficking of ECVs to prevent them from fusing with lysosomes, enabling them to escape degradation by lysozymes within these cells. Elucidating how subtle modification of the capsule enhances bacterial defenses against host innate immunity will enable the future development of effective drugs or vaccines against infection by E. coli K1.