The effect of the entrapment of mushroom tyrosinase (EC 1.14.18.1) within liposomes on the enzyme activity and Km vs. L-3,4-dihydroxyphenylalanine is reported in the present work; the effect of cholesterol insertion within liposome membranes on the enzyme activity has also been studied. The oxidation rates of various monophenols and diphenols by free and liposome-integrated mushroom tyrosinase were measured and the oxidation latencies vs. different substrates investigated. The different substrates are apparently oxidized according to the properties of the substituents as electron donors or acceptors; the Km values vs. L-3,4-dihydroxyphenylalanine calculated on measuring O2 consumption are higher than those calculated on measuring the dopachrome production rates. It is interesting that natural substrates of tyrosinase are oxidized according to a negative catalysis by the liposome-entrapped enzyme; this point is discussed in relation to the well known cytotoxicity of some intermediates of the Raper-Mason pathway.