This paper presents a study on the membrane fusion activity of a 23-residue synthetic peptide, representing the N-terminus of gp41 of the human immunodeficiency virus type I (HIV-1; LAV1a strain), in a model system involving large unilamellar vesicles (LUV) composed of the negatively charged 1-palmitoyl-2-oleoylphosphatidylglycerol (POPG). The peptide (HIVarg) induced fusion of POPG LUV as evidenced by (i) mixing of membrane lipids, (ii) mixing of aqueous vesicle contents, and (iii) an irreversible increase in vesicle size. Fusion could be induced only in the presence of millimolar concentrations of Ca2+ or Mg2+, needed for induction of vesicle aggregation; the divalent cations by themselves did not induce any fusion. The rate constant of the fusion reaction, as determined by simulation of the process according to a kinetic model, increased dramatically with the peptide-to-lipid molar ratio, indicating that the peptide was the mediator of the process. In the absence of divalent cations, the HIVarg peptide induced leakage of small molecules due to formation of pores in the membrane of single vesicles. Final extents and kinetics of this leakage process could be simulated adequately by model calculations for peptide-to-lipid ratios ranging from 1:25 to 1:750. Experiments, in which the order of peptide and Ca2+ addition to the vesicles was varied, indicated that the peptide is likely to adopt two different structures, one in the absence of Ca2+, primarily supporting leakage by formation of pores in separate vesicles, and one in the presence of Ca2+, primarily supporting fusion. Once a final structure had been established, it persisted even upon addition or removal of Ca2+.(ABSTRACT TRUNCATED AT 250 WORDS)