When sonicated suspensions of 1-palmitoyl-2-lysophosphatidyl-N-monomethylethanolamine (lysoPME) or 1-palmitoyl-2-lysophosphatidyl-N,N-dimethylethanolamine (lysoPDE) were incubated with rat liver microsomes and [Me-3H]AdoMet or [Me-14C]AdoMet, one methyl group was added to these lipids. With dipalmitoylphosphatidyl-N-monomethylethanolamine (PME) or dipalmitoylphosphatidyl-N,N-dimethylethanolamine (PDE) as substrates, enzymic monomethylation was also observed. However, the methylation of the lyso compounds was biphasic with an optimum at 0.75 mM lysoPME and 0.5 mM lysoPDE. In contrast to PME or PDE, the lysophospholipids produced a decrease in PC synthesis by lysoPME was reversible and was accompanied by an up to 4-fold increase in PDE synthesis. Competition experiments between lysoPME or lysoPDE and PME or PDE, together with kinetic studies, indicate a connection with methylation of both lyso- and diacylphospholipids. The same active site or sites in close proximity may serve for the second and third methylations. Hence, the presence of two acyl groups on the phospholipid molecule is not a prerequisite for N-methylation of this class of compounds. On the contrary, suspensions of phosphatidylethanolamine, or 2-lysophosphatidylethanolamine (lysoPE) with acyl chains of different degrees of saturation or with one alkenyl at the C1 position of the glycerol were not substrates for PE-N-methyltransferase; the lysoPEs were inhibitory above 0.5 mM.