In Escherichia coli, the major cytoplasmic domain (C6) of the polytopic membrane protein lactose permease (LacY) is exposed to the opposite side of the membrane from a neighboring periplasmic domain (P7). However, these domains are both exposed on the periplasmic side of the membrane in a mutant of E.coli lacking phosphatidylethanolamine (PE) wherein LacY only mediates facilitated transport. When purified LacY was reconstituted into liposomes lacking PE or phosphatidylcholine (PC), C6 and P7 were on the same side of the bilayer. In liposomes containing PE or PC, C6 and P7 were on opposite sides of the bilayer. Only the presence of PE in the liposomes restored active transport function of LacY as opposed to restoration of only facilitated transport function in the absence of PE. These results were the same for LacY purified from PE-containing or PE-lacking cells, and are consistent with the topology and function of LacY assembled in vivo. Therefore, irrespective of the mechanism of membrane insertion, the subdomain topological orientation and function of LacY are determined primarily by membrane phospholipid composition.