L-929 cell surface membranes were incubated with S-adenosyl-L-[methyl-3H]-methionine and found to contain phosphatidylethanolamine: S-adenosylmethionine N-methyltransferase (phosphatidylethanolamine N-methyltransferase) activity. The enzyme or combination of enzymes responsible for this activity methylated endogenous phosphatidylethanolamine and its methylated derivatives to yield phosphatidyl-N-monomethylethanolamine, phosphatidyl-N,N-dimethylethanolamine, and phosphatidylcholine. Maximum enzyme activity was expressed at pH 6.9, the reaction was not dependent on the presence of divalent cations, and exogenously added phospholipids did not stimulate the rate of reaction. Phospholipid methylation was inhibited by S-adenosyl-L-homocysteine and by local anaesthetic drugs such as chlorpromazine and tetracaine which partition into the lipid bilayer. Control experiments demonstrated that the surface membrane-associated methyltransferase activity was not due to contamination of surface membrane preparations with intracellular membranes. Surface membranes were found to have higher specific methyltransferase activities than whole L-cell homogenates or endoplasmic reticulum-enriched microsomes. The low rate of methyltransferase function expressed in vitro (approximately 1 pmol/min . mg protein) suggests that phospholipid methylation is not a major metabolic source of surface membrane phosphatidylcholine.