Mycoplasma gallisepticum strains have a membrane-bound lysophospholipase which hydrolyzes lysophospholipid generated in these membranes by treatment with an external phospholipase. This paper studies the hydrolysis of the membranous lysophospholipids by an enzyme residing in the same membrane (intramembrane utilization) or in adjacent membranes (intermembrane utilization). To study intermembrane hydrolysis, the phospholipids of M. gallisepticum were labeled with [3H]oleic acid. Membranes were prepared, heated at 65 degrees C, and subsequently treated with pancreatic phospholipase A2. This resulted in membranes whose enzyme was heat inactivated, but which contained lysophospholipid. When these membranes were mixed with M. gallisepticum cells or membranes, the lysophospholipid was hydrolyzed by the membranous lysophospholipase. To study intramembrane hydrolysis, [3H]oleyl-labeled membranes of M. gallisepticum were treated with pancreatic phospholipase A2 at pH 5.0. At this pH, lysophospholipid was generated but not hydrolyzed. Adjustment of the pH to 7.4 resulted in hydrolysis of the lysophospholipid by the membranous lysophospholipase. These procedures permitted measuring the initial rates of intramembrane and intermembrane hydrolysis of the lysophospholipid, showing that the time course and dependence on endogenous substrate concentration were different in the intramembrane and intermembrane modes of utilization. They also permitted calculation of the molar concentration of the lysophospholipid in the membrane and its rate of hydrolysis, expressed as moles per minute per cell or per square centimeter of cell surface.