Na+/K+ -ATPase, reconstituted into phospholipid vesicles, has been used to study the localisation of binding sites of ligands involved in the phosphorylation reaction. Inside-out oriented Na+/K+ -ATPase molecules are the only population in this system, which can be phosphorylated, as the rightside-out oriented as well as the non-incorporated enzyme molecules are inhibited by ouabain. In addition, the right-side-out oriented Na+/K+ -ATPase molecules have their ATP binding site intravesicularly and are thus not accessible to substrate added to the extravesicular medium. Functional binding sites for the following ligands have been demonstrated: (i) Potassium, acting at the extracellular side with high affinity (stimulating the dephosphorylation rate of the E2P conformation) and low affinity (inducing the non-phosphorylating E2K complex). (ii) Potassium, acting at the cytoplasmic side with both high and low affinity. The latter sites are also responsible for the formation of an E2K complex and complete with Na+ for its binding sites. (iii) Sodium at the cytoplasmic side responsible for stimulation of the phosphorylation reaction. (iv) Sodium (and amine buffers) at the extracellular side enhancing the phosphorylation level of Na+/K+ -ATPase where choline chloride has no effect. (v) Magnesium at the cytoplasmic side, stimulating the phosphorylation reaction and inhibiting it above optimal concentrations.