Apolipophorin III (apoLp-III) from Manduca sexta has a molecular weight of 18,100. Based on its hydrodynamic properties (sedimentation and diffusion coefficients, frictional ratio, intrinsic viscosity) and its behavior during gel permeation chromatography, we concluded that apoLp-III is a prolate ellipsoid with an axial ratio of about 3. The circular dichroic spectrum of apoLp-III suggests that the protein contains approximately 50% alpha-helix. At the air-water interface, apoLp-III forms a monolayer which is gaseous at surface pressures less than or equal to 1 dyne/cm. The isotherm of this phase yields an excluded molecular area of 3800 A2/molecule (23 A2/amino acid). At a surface pressure of 22.1 dynes/cm, the monolayer undergoes a phase transition reminiscent of a first-order phase transition of pure lipids. The monolayer can be compressed in this surface pressure range to an area per molecule of 480 A2 (2.9 A2/amino acid). Since a globular protein of molecular weight 18,100 could occupy an area of only about 2000 A2 when bound to a surface, it is suggested that in the expanded state, apoLp-III must unfold on the surface, whereas in the compressed state, the molecule is oriented with its minor axis parallel to the water surface. ApoLp-III binds with high affinity (Kd = 1.9 X 10(-7)M) to both phosphatidylcholine- and diacylglycerol-coated polystyrene beads. All of these results are consistent with the proposal that apoLp-III plays a key role in increasing the capacity of the insect lipoprotein, lipophorin, to transport diacylglycerol by stabilizing the increment of lipid-water interface that results from diacylglycerol uptake.