To characterize further the nature and site of the receptor for the IgG stimulator in Graves' disease, we have developed a preparative scheme to provide a bovine thyroid subfraction rich in plasma membranes. Pellets (800 X g) obtained from bovine thyroid homogenates were layered on a 30-64% continuous sucrose gradient (SG). The centrifuged gradient was divided into four portions (SG1, 2, 3, and 4); and these along with the 800 X g pellet were characterized in terms of their capacity to neutralize (bind) the biological activity of LATS, their specific binding of [125I]TSH, and their subcellular marker content. Subfraction SG1 contained the highest adenyl cyclase specific activity, the highest [125I]TSH binding specific activity, and vied with the 800 X g pellet and SG3 for the highest specific activity of LATS neutralization. Electron microscopy of SG1 showed a predominance of plasma membrane structures contaminated with a modest amount of cellular debris. Adenyl cyclase activity in SG1 was enhanced by TSH, LATS, and sodium fluoride. Although a dose-response curve could be established for TSH, a similar relationship could not be established for LATS. We conclude that activation of plasma membrane-bound adenyl cyclase is associated with neutralization of the biological activity of LATS. Further, the difference between [125I]TSH binding and LATS neutralization activity observed in the various thyroid membrane subfractions suggests that either LATS and TSH interact at different sites or have different mechanisms of binding at a common site.