The purified membrane-bound form of guanylate cyclase was incorporated into artificial unilamellar phospholipid vesicles. The rate and extent of enzyme incorporation into the vesicles was dependent upon the phospholipid concentration and the time period of incubation. The enzyme was incorporated at a significantly faster rate after removal of carbohydrate with endoglycosidase H. The incorporation of the enzyme led to a 10-fold decrease in the apparent maximal velocity and a 2-fold increase in the apparent Michaelis constant for MnGTP. Extraction of liposomes containing guanylate cyclase with 0.2% Lubrol PX resulted in the recovery of 85% of the original amount of added activity, suggesting that the decrease in maximal velocity was not due to enzyme denaturation. Phosphatidylcholine liposomes differentially effected the activity of the membrane-form of guanylate cyclase, dependent on the nature of the fatty acid present on the phospholipid. Specific activities ranged between 458 nmol/min per mg and 2.6 mumol/min per mg, dependent upon the fatty acids present. Liposomes containing the membrane-bound form of guanylate cyclase were subsequently fused with erythrocytes using poly(ethylene glycol) 4000 in attempts to introduce the enzyme into intact cells. The enzyme was successfully introduced into the erythrocytes; greater than 90% of the enzyme activity was subsequently shown to be associated with erythrocyte membranes. Cyclic GMP concentrations of erythrocytes increased from essentially nondetectable to 4 pmol/10(9) cells after introduction of the enzyme. These results demonstrate that guanylate cyclase can be incorporated into liposomes in an active state and that such liposomes can be used to introduce the enzyme into cells where it can subsequently function to generate cyclic GMP.