The influence of the preservative, propyl paraben (PPB) on the biophysical properties of dipalmitoyl phosphatidyl choline (DPPC) vesicles, both in multilamellar vesicle (MLV) and unilamellar vesicle (ULV) forms, has been studied using DSC and ((1)H and (31)P) NMR. The mechanism by which PPB interacts with DPPC bilayers was found to be independent of the morphological organization of the lipid bilayer. Incorporation of PPB in DPPC vesicles causes a significant depression in the transition temperature and enthalpy of both the pre-transition (PT) and the gel to liquid crystalline transition. The presence of the PPB also reduces the co-operativity of these transitions. However, at high PPB concentration the PT disappears. DSC and NMR findings indicate that: (i) PPB is bound strongly to the lipid bilayer leading to increased headgroup fluidity due to reduced headgroup-headgroup interaction and (ii) the PPB molecules are intercalated between the DPPC polar headgroups with its alkyl chain penetrate into the co-operative region. MLV incorporated with high PPB concentration shows additional transitions whose intensity increases with increasing PPB concentration. This phase segregation observed could probably be due to co-existence of PPB-rich and PPB-poor phospholipid domains within the bilayers. The effect of inclusion of cholesterol in the PPB-free and PPB-doped DPPC dispersion was also studied. Equilibration studies suggest that PPB molecules are very strongly bound and remain intercalated between the polar headgroup for prolonged time.