1. GM(1)-ganglioside, specifically tritiated in the terminal galactose, was hydrolysed by two forms of ;acid' methylumbelliferyl beta-galactosidase isolated on gel filtration. 2. Identification of GM(1)-ganglioside beta-galactosidase activity with the ;acid' methyl-umbelliferyl beta-galactosidases was based on the following: coincident elution profiles on gel filtration; simultaneous inactivation by heat and other treatments; stabilization of both activities by chloride ions; mutual inhibition of hydrolysis by the two substrates. 3. The two isoenzymes (I) and (II) showed general requirements for a mixture of anionic and nonionic detergents in the hydrolysis of the natural substrate. 4. Isoenzyme (I) differed from (II) in molecular size, pH-activity profile, relative resistance to dilution and in sensitivity to various inhibitors. 5. The most significant difference between the isoenzymes is in substrate saturation kinetics: (I) was hyperbolic whereas (II) was sigmoid. The apparent Michaelis constants were 28mum for (I) and 77mum for (II). Isoenzyme (I) was insensitive to GM(2)-ganglioside whereas (II) was inhibited, consistent with the hypothesis that GM(1)-ganglioside (and its analogue) acts as modifier in isoenzyme (II) but not in (I). 6. Isoenzyme (I) was membrane-bound whereas (II) was soluble; the former probably represents isoenzyme (II) bound to membrane components, thereby becoming activated. 7. Membranes may serve a dual role in enzyme catalysis involving lipids: as a medium where both enzyme and substrate are effectively concentrated, and as actual activator of enzymes through binding of the latter to specific membrane components.