Previous studies using intact rat liver mitochondria have shown that the soluble matrix enzymes carbamoyl-phosphate synthase (ammonia) (CPS) and ornithine carbamoyltransferase (OCT) display some kinetic properties which would not be observed if they were homogeneously distributed in the matrix. In the present work we have extended these studies, using toluene-treated mitochondria which are fully permeable to substrates and inhibitors, yet retain 90% of their soluble enzymes. The results provide evidence of functional organization of CPS and OCT in situ. The major findings are as follows. (1) The apparent Km values of matrix OCT for carbamoyl phosphate and ornithine are respectively 8 and 2 times those measured for the soluble enzyme. delta-N-Phosphonacetyl-L-ornithine inhibits OCT in situ less than in solution, especially when carbamoyl phosphate is synthesized in the mitochondria rather than added to the medium. (2) During citrulline synthesis from endogenously generated carbamoyl phosphate, the concentration of the latter in permeabilized mitochondria is more than 10 times that in the medium, although the mitochondria are freely permeable to added molecules of this size. (3) Endogenously formed carbamoyl phosphate is used preferentially by OCT in situ; addition of a 200-fold excess of unlabelled carbamoyl phosphate has little effect on the conversion of labelled endogenously formed carbamoyl phosphate into citrulline by matrix OCT. (4) The synthesis de novo of carbamoyl phosphate from NH3, HCO3- and ATPMg is the same in the presence and absence of ornithine. (5) Studies with co-immobilized CPS and OCT gave results concordant with some of the above observations and with previous ones with intact mitochondria.