Purified membrane vesicles isolated from sea urchin eggs form nuclear envelopes around sperm nuclei following GTP hydrolysis in the presence of cytosol. A low density subfraction of these vesicles (MV1), highly enriched in phosphatidylinositol (PtdIns), is required for nuclear envelope formation. Membrane fusion of MV1 with a second fraction that contributes most of the nuclear envelope can be initiated without GTP by an exogenous bacterial PtdIns-specific phospholipase C (PI-PLC) which hydrolyzes PtdIns to form diacylglycerides and inositol 1-phosphate. This PI-PLC hydrolyzes a subset of sea urchin membrane vesicle PtdIns into diglycerides enriched in long chain, polyunsaturated species as revealed by a novel liquid chromatography-mass spectrometry analysis. Large unilammelar vesicles (LUVs) enriched in PtdIns can substitute for MV1 in PI-PLC induced nuclear envelope formation. Moreover, MV1 prehydrolyzed with PI-PLC and washed to remove inositols leads to spontaneous nuclear envelope formation with MV2 without further PI-PLC treatment. LUVs enriched in diacylglycerol mimic prehydrolyzed MV1. These results indicate that production of membrane-destabilizing diglycerides in membranes enriched in PtdIns may facilitate membrane fusion in a natural membrane system and suggest that MV1, which binds only to two places on the sperm nucleus, may initiate fusion locally.