The lateral membrane organization of phosphatidylserine, diacylglycerol, substrate, and Ca(2+)-dependent protein kinase C in large unilamellar vesicles was investigated by using fluorescence digital imaging microscopy. The formation of phosphatidylserine domains could be induced by either Ca2+, the MARCKS peptide, or protein kinase C. However, only Ca2+ could induce diacylglycerol to partition into the phosphatidylserine domains. In the complete protein kinase C assay mixture, two separate triple-labeling experiments demonstrated the colocalization of phosphatidylserine, protein kinase C, diacylglycerol, and the MARCKS peptide in domains. The amounts of all the labeled components in whole vesicles and in domains were measured at various concentrations of either phosphatidylserine, Ca2+, diacylglycerol, or the MARCKS peptide or with the addition of polylysine. The role of each component in forming membrane domains and in mediating the enzyme activity was analyzed. The results indicated that the inclusion of the MARCKS peptide in the domains, not just the binding of the substrate to vesicles, was especially important for PKC activity. The formation of PKC domains required the presence of DAG and Ca2+ at physiological ionic strength. The PKC activity was proportional to the amounts of PKC and substrate in the domains. The results also showed that the MARCKS peptide left the domains after being phosphorylated. A model for the activation of protein kinase C involving sequestering of the reaction components into membrane domains is proposed. The efficiency of the reaction was greatly increased by concentrating the activators, the enzyme, and the substrate into domains.