A water-soluble dimeric form of acetylcholinesterase from electric organ tissue of Torpedo californica was obtained by solubilization with phosphatidylinositol-specific phospholipase C of the glycophosphatidylinositol-anchored species, followed by purification by affinity chromatography. The water-soluble species, in its catalytically active native conformation, did not interact with unilamellar vesicles of dimyristoylphosphatidylcholine. We previously showed that either chemical modification or exposure to low concentrations of guanidine hydrochloride converted the native enzyme to compact, partially unfolded species with the physicochemical characteristics of the molten globule state. In the present study, it was shown that such molten globule species, whether produced by mild denaturation or by chemical modification, interacted efficiently with small unilamellar vesicles. Binding was not accompanied by significant vesicle fusion, but transient leakage occurred at the time of binding. The bound acetylcholinesterase reduced the transition temperature of the vesicles slightly, and NMR data suggested that it interacted primarily with the head-group region of the bilayer. The effects of tryptic digestion of the bound acetycholinesterase were monitored by gel electrophoresis under denaturing conditions. It was found that a single polypeptide, of mass approximately 5 kDa, remained associated with the vesicles. Sequencing revealed that this is a tryptic peptide corresponding to the sequence Glu 268-Lys 315. This polypeptide contains the longest hydrophobic sequence in the protein, Leu 274-Met 308, as identified on the basis of hydropathy plots. Inspection of the three-dimensional structure of acetylcholinesterase reveals that this hydrophobic sequence is largely devoid of tertiary structure and is localized primarily on the surface of the protein. It is suggested that this hydrophobic sequence is aligned parallel to the surface of the vesicle membrane, with nonpolar residues undergoing shallow penetration into the bilayer.