The susceptibility of partially peroxidized liposomes of 2-[1-14C] linoleoylphosphatidylethanolamine ([14C]PE) to hydrolysis by cellular phospholipases was examined. [14C]PE was peroxidized by exposure to air at 37 degrees C, resulting in the formation of more polar derivatives, as determined by thin-layer chromatographic analysis. Hydrolysis of these partially peroxidized liposomes by lysosomal phospholipase C associated with cardiac sarcoplasmic reticulum, and by rat liver lysosomal phospholipase C, was greater than hydrolysis of non-peroxidized liposomes. By contrast, hydrolysis of liposomes by purified human synovial fluid phospholipase A2 or bacterial phospholipase C was almost completely inhibited by partial peroxidation of PE. Lysosomal phospholipase C preferentially hydrolyzed the peroxidized component of the lipid substrate which had accumulated during autoxidation. The major product recovered under these conditions was 2-monoacylglycerol, indicating sequential degradation by phospholipase C and diacylglycerol lipase. Liposomes peroxidized at pH 7.0 were more susceptible to hydrolysis by lysosomal phospholipases C than were liposomes peroxidized at pH 5.0, in spite of greater production of polar lipid after peroxidation at pH 5.0. Sodium bisulfite, an antioxidant and an inhibitor of lysosomal phospholipases, prevented: (1) lipid autoxidation, (2) hydrolysis of both non-peroxidized and peroxidized liposomes by sarcoplasmic reticulum and (3) loss of lipid phosphorus from endogenous lipids when sarcoplasmic reticulum was incubated at pH 5.0. These studies show that lipid peroxidation may modulate the susceptibility of phospholipid to attack by specific phospholipases, and may therefore be an important determinant in membrane dysfunction during injury. Preservation of membrane structural and functional integrity by antioxidants may result from inhibition of lipid peroxidation, which in turn may modulate cellular phospholipase activity.