Mixtures of dipalmitoylphosphatidylethanolamine (DPPE) and cholesterol (CHOL) have been studied with solid-state 13C and 2H nuclear magnetic resonance (NMR) techniques. DPPE was 13C labeled at the carbonyl group of the sn-2 chain, and 2H was introduced at the 4 position of the sn-2 chain and the 1 position of the ethanolamine head group. The 13C and 2H spectra of each labeled lipid were studied as a function of temperature and CHOL concentration, and the results indicate three distinguishable temperature-composition regions. In region I, which occurs at low temperatures and CHOL concentrations, the 13C and 2H spectra are similar to those observed for pure DPPE in its gel phase. In region II, which occurs at higher temperatures or CHOL concentrations, the sn-2 13C = O spectra of DPPE/CHOL mixtures display two components, indicating the coexistence of two conformationally and dynamically inequivalent DPPE molecules. One of these is similar to gel-state DPPE, while the second "fluid" fraction displays some liquid-crystalline character. The two-component 13C spectra can be simulated quantitatively with a two-parameter chemical exchange model that permits the fraction of each form and the exchange rate to be determined as a function of temperature and composition. The 2H spectra observed in region II do not exhibit two components in an obvious way. Nevertheless, with some reasonable assumptions, the 2H spectra obtained from chain-labeled DPPE can also be simulated with a two-component model with the exchange rates and fractional populations obtained from the 13C results. The calculations predict not only the line shapes but also the losses in spectral intensity arising from use of the quadrupole echo technique. Furthermore, the 2H spectra show that with increasing temperature the fluid fraction observed in region II undergoes a transition to a higher degree of disorder, and should therefore not be labeled "liquid crystalline". In region III, which occurs at high temperatures and CHOL concentrations, both the 13C and 2H spectra are those expected of liquid-crystalline lipid. The NMR results are compared to, and found to be different from, those obtained with calorimetric investigations. It is suggested that these differences are due to the small domains present in DPPE/CHOL mixtures that lead to phase transitions of low cooperativity. Some metastability of the DPPE/CHOL system was observed at high CHOL concentrations and low temperatures.