The initial kinetics of fusion and leakage of liposomes composed of N-methylated dioleoylphosphatidylethanolamine (DOPE-Me) have been correlated with the phase behavior of this lipid. Gagné et al. [Gagné, J., Stamatatos, L., Diacovo, T., Hui, S. W., Yeagle, P., & Silvius, J. (1985) Biochemistry 24, 4400-4408] have shown that this lipid is lamellar (L alpha) below 20 degrees C, is hexagonal (HII) above 70 degrees C, and shows isotropic 31P NMR resonances at intermediate temperatures. This isotropic state is also characterized by complex morphological structures. We have prepared DOPE-Me liposomes at pH 9.5 and monitored the temperature dependence of the mixing of aqueous contents, leakage, and changes in light scattering upon reduction of the pH to 4.5. At and below 20 degrees C, where the lipid is in the L alpha phase, there is very little aggregation or destabilization of the liposomes. Between 30 and 60 degrees C, i.e., where the lipid is in the isotropic state, the initial rates of liposome fusion (mixing of aqueous contents) and leakage increase. At temperatures approaching that where the hexagonal HII phase transition occurs, the initial rates and extents of fusion decrease, whereas leakage is enhanced. Similar results were found for dioleoylphosphatidylethanolamine/dioleoylphosphatidylcholine (2:1) liposomes. These results clearly establish a common mechanism between the appearance of the isotropic state (between the L alpha and HII phases) and the promotion of liposome fusion. We propose a simple model to explain both the observed behavior of phosphatidylethanolamine-containing membranes with respect to liposome fusion and/or lysis and the beginning of the L alpha-HII phase transition.