Chimeric molecules between human lipoprotein lipase (LPL) and rat hepatic lipase (HL) were used to identify structural elements responsible for functional differences. Based on the close sequence homology with pancreatic lipase, both LPL and HL are believed to have a two-domain structure composed of an amino-terminal (NH2-terminal) domain containing the catalytic Ser-His-Asp triad and a smaller carboxyl-terminal (COOH-terminal) domain. Experiments with chimeric lipases containing the HL NH2-terminal domain and the LPL COOH-terminal domain (HL/LPL) or the reverse chimera (LPL/HL) showed that the NH2-terminal domain is responsible for the catalytic efficiency (Vmax/Km) of these enzymes. Furthermore, it was demonstrated that the stimulation of LPL activity by apolipoprotein C-II and the inhibition of activity by 1 M NaCl originate in structural features within the NH2-terminal domain. HL and LPL bind to vascular endothelium, presumably by interaction with cell surface heparan sulfate proteoglycans. However, the two enzymes differ significantly in their heparin affinity. Experiments with the chimeric lipases indicated that heparin binding avidity was primarily associated with the COOH-terminal domain. Specifically, both HL and the LPL/HL chimera were eluted from immobilized heparin by 0.75 M NaCl, whereas 1.1 M NaCl was required to elute LPL and the HL/LPL chimera. Finally, HL is more active than LPL in the hydrolysis of phospholipid substrates. However, the ratio of phospholipase to neutral lipase activity in both chimeric lipases was enhanced by the presence of the heterologous COOH-terminal domain, demonstrating that this domain strongly influences substrate specificity. The NH2-terminal domain thus controls the kinetic parameters of these lipases, whereas the COOH-terminal domain modulates substrate specificity and heparin binding.