I(C), an endogenous cytoplasmic inhibitor of vacuolar carboxypeptidase Y in the yeast Saccharomyces cerevisiae, is classified as a member of the phosphatidylethanolamine-binding protein family. The binding of I(C) to phospholipid membranes was first analyzed using a liposome-binding assay and by surface plasmon resonance measurements, which revealed that the affinity of this inhibitor was not for phosphatidylethanolamine but for anionic phospholipids, such as phosphatidylserine, phosphatidylinositol 3-phosphate, phosphatidylinositol 3,4-bisphosphate, and phosphatidylinositol 3,4,5-trisphosphate, with K(D) values below 100 nm. The liposome-binding assay and surface plasmon resonance analyses of I(C), when complexed with carboxypeptidase Y, and the mutant forms of I(C) further suggest that the N-terminal segment (Met1-His18) in its carboxypeptidase Y-binding sites is involved in the specific and efficient binding to anionic phospholipid membranes. The binding of I(C) to cellular membranes was subsequently analyzed by fluorescence microscopy of yeast cells producing the green fluorescent protein-tagged I(C), suggesting that I(C) is specifically targeted to vacuolar membranes rather than cytoplasmic membranes, during the stationary growth phase. The present findings provide novel insights into the membrane-targeting and biological functions of I(C) and phosphatidylethanolamine-binding proteins.