Hydrolysis of phospholipids in biological membranes by phospholipase C (PLC) produces an important second messenger molecule, 1,2-diacylglycerol (DAG), that is essential for the activation of protein kinase C (PKC). While the effects of DAG on model membranes have been investigated earlier, studies on physical properties of DAG introduced into phospholipid bilayers by PLC have been lacking. We present an NMR approach for studying structural and kinetic aspects of PLC-mediated hydrolysis of 13 carbonyl-enriched phospholipids in model membranes (small unilamellar vesicles). The product DAG is readily detected by 13C NMR, and its structural properties as well as those of the model membrane can be monitored continuously. PLC hydrolysis was limited to a low proportion of the model membrane by incorporating a small amount of ester phospholipid into a nonhydrolyzable ether-linked phospholipid matrix. Under these conditions, PLC (Bacillus cereus) hydrolyzed only the monolayer of phosphatidylcholine to which it was exposed (the outer monolayer). The 1,2-DAG product remained associated with the membrane bilayer and did not alter bilayer structure in any detectable way. From the chemical shift data, it is inferred that the DAG has an interfacial conformation similar to that of phosphatidylcholine. These results show that DAG could activate PKC by direct interaction with the enzyme rather than by perturbation of the membrane bilayer.