Human serum paraoxonase/arylesterase (PON1) is HDL-associated and appears to protect low density lipoproteins (LDL) from oxidation. Mature PON1 retains its N-terminal hydrophobic signal sequence, which may be needed for binding to HDL. By site-directed mutagenesis, we created a mutant PON1 (A19A20) with a cleavable N-terminus to determine if this peptide mediated binding to lipoproteins. As a model system, we studied binding of mutant and wild type PON1s to lipoproteins in fetal bovine serum-containing expression medium and found that the wild type recombinant enzyme associated with lipoproteins whereas the A19A20 mutant did not. These results show that the N-terminus is required for binding to either apolipoproteins or phospholipids. Furthermore, we showed that wild type enzyme can bind to phospholipids directly without apolipoproteins. To determine if lipid binding is a requirement for PON1's protection against LDL oxidation, we used a copper ion-induced oxidation system and found that the wild type enzyme and A19A20 mutant showed similar reductions in both peroxide and aldehyde formation. We conclude that PON1 depends upon its N-terminal hydrophobic peptide for its association with serum lipoproteins.