Semliki Forest virus was mixed with liposomes containing phosphatidylcholine,phosphatidylethanolamine, sphingomyelin, and cholesterol. When the pH of the mixture was dropped to 6 or below, rapid fusion between the membranes of the virus and the liposomes occurred, resulting in the transfer of viral nucleocapsids into the liposomes. Fusion was demonstrated biochemically by trapping RNase or trypsin within the liposomes. Trapped RNase digested the viral RNA into acid-soluble form, providing a simple quantitative assay for fusion. Trapped trypsin digested the viral capsid protein. Fusion was also demonstrated by electron microscopy as the formation of large vesicles containing viral glycoproteins on the surface and nucleocapsids inside. The efficiency of fusion was 91 +/- 6%. In addition to low pH, it required that the viral glycoproteins be intact. In the target liposomes, cholesterol (but none of the individual phospholipids) was essential. Divalent cations were not required. Our previous studies with tissue culture cells indicated that the final step in the penetration of the Semliki Forest virus genome into host cells might involve a fusion event between the membrane of lysosomally trapped viruses and the lysosomal membrane [Helenius, A., Kartenbeck, J., Simons, K. & Fries, E. (1980) J. Cell Biol, 84, 404--420]. The data presented here are fully compatible with this hypothesis.