Red cell membranes prepared by hemolysis and washing in hypotonic Tris buffer crenate when suspended at 0 degrees C in isotonic medium. At 37 degrees C, in the presence of 1 mM MgATP, the crenated membranes are progressively converted to smooth-contoured discs and cup-forms. The phosphorylation of proteins and lipids during shape transformation in the presence of [gamma-32P]ATP has been studied. Spectrin phosphorylation and shape change could be dissociated in several ways, demonstrating that spectrin phosphorylation is neither necessary nor sufficient for the membrane smoothing reaction. Adenosine markedly inhibited phosphoinositide regeneration without altering shape change. Phosphatidic acid synthesis from endogenous diacylglycerol was not affected by adenosine and comparison of sheep, human and rabbit ghosts, which vary greatly in shape change capacity, demonstrated a direct correlation between phosphatidic acid synthesis and shape change rate. The results suggest that membrane curvature may be induced by diacyglycerol phosphorylation at the inner surface of the membrane bilayer, while the membrane skeleton limits the curvature and determines the shape ultimately assumed.