CTP:phosphocholine cytidylyltransferase (CCTalpha) plays a key role in the biosynthesis of surfactant phosphatidylcholine. In this study, we investigated the role of its membrane-binding (M) domain in modulating its structure, function, and cellular distribution. Multiple enhanced green fluorescent protein-CCTalpha constructs were generated to evaluate the subcellular distribution in A549 cells. The M domain targeted CCTalpha to the perinuclear (membrane-rich) region. Microinjections with glutathione-S-transferase fusion protein containing the M domain corroborated the perinuclear targeting. Deletion of the M domain or substitutions of the hydrophobic residues with arginine/serine in the VEEKS(267-277) motif of the M domain resulted in a nuclear appearance and indented nuclei. Membrane binding of CCTalpha decreased gradually as the number of positively charged arginine residues increased in the VEEKS motif. To identify whether membrane-protein interactions cause structural alterations in CCTalpha, we visualized the protein in the absence and presence of lipids by transmission electron microscopy. These studies revealed that CCTalpha forms a dimer-like complex that condenses upon binding to lipid vesicles, but not lipid monolayers. The influence of the M domain on CCTalpha activity was assessed in transgenic mice overexpressing the N-terminal catalytic domain (CCTalpha(1-239)), N-terminal catalytic plus M domain (CCTalpha(1-290)), or full-length CCTalpha(1-367) in fetal type II cells by using the surfactant protein C promoter. Only overexpression of CCTalpha(1-367) increased surfactant phosphatidylcholine synthesis. Thus, the M domain influences membrane binding, cellular distribution, and topology of CCTalpha, but the domain alone is not sufficient to confer CCT activity in alveolar type II cells in vivo.