The membrane-permeable photoactivatable reagent 3-trifluoromethyl-3-(m-[125I]iodophenyl)diazirine was used to selectively label the hydrophobic domain of the amphipathic form of gamma-glutamyl transpeptidase reconstituted into phosphatidylcholine vesicles. The reagent labels only a limited segment of the large subunit of the heterodimeric transpeptidase. Treatment of labeled and reconstituted enzyme with papain causes the release of the unlabeled catalytic domain and the cleavage of the membrane binding domain into two discrete 125I-labeled peptides. The hydrophobic peptides which remain associated with the vesicles were isolated by chromatography on Sephadex LH-60. They exhibit apparent molecular weights of 8700 and 3400. Amino acid analysis indicates that they contain 68 and 58% hydrophobic residues, respectively. The procedures developed in this study should make possible the large scale isolation of the unlabeled membrane binding domain of gamma-glutamyl transpeptidase.