Rapid activation of phospholipase D (PLD) in response to cell stimulation was recently demonstrated in many systems, raising the hypothesis that PLD participates in transduction of extracellular signals across the plasma membrane. In the present study, we describe the identification of a neutral PLD activity in purified rat brain synaptic plasma membranes, and the in vitro conditions required to assay its catalytic activity with exogenous [3H]phosphatidylcholine as substrate. Production of [3H]phosphatidic acid, the natural lipid product of PLD and of [3H]phosphatidylethanol, catalyzed by PLD in the presence of ethanol via transphosphatidylation, were measured. The synaptic membrane PLD exhibited its highest activity at pH 7.2 and was thus defined as a neutral PLD. Enzyme activity was absolutely dependent on the presence of sodium oleate and was strongly activated by Mg2+ ions (at 1 mM). Ca2+ at concentrations up to 0.25 mM was as stimulatory as Mg2+, but at 2 mM it completely inhibited enzyme activity. Mg2+ extended the linear phase of PLD activity from 2 to 15 min, suggesting that it may stabilize the enzyme under our assay conditions. The production of [3H]phosphatidylethanol was a saturable function of ethanol concentration. Production of [3H] phosphatidic acid was inversely related to the concentration of ethanol and to the accumulation of phosphatidylethanol, indicating that the two phospholipids are indeed produced by the competing hydrolase and transferase activities of the same enzyme. beta,beta-Dimethylglutaric acid, utilized previously as a buffer in studies of rat brain PLD, inhibited enzyme activity at neutral pH but not at acidic pH. The properties of the neutral synaptic membrane PLD and its relationships with other in vitro, acid, and neutral PLD activities, as well as with the signal-dependent PLD detected in intact cells, are discussed.