A wide variety of proteins are tethered by a glycosylphosphatidylinositol (GPI) anchor to the extracellular face of eukaryotic plasma membranes, where they are involved in a number of functions ranging from enzymatic catalysis to adhesion. The exact function of the GPI anchor has been the subject of much speculation. It appears to act as an intracellular signal targeting proteins to the apical surface in polarized cells. GPI-anchored proteins are sorted into sphingolipid- and cholesterol-rich microdomains, known as lipid rafts, before transport to the membrane surface. Their localization in raft microdomains may explain the involvement of this class of proteins in signal transduction processes. Substantial evidence suggests that GPI-anchored proteins may interact closely with the bilayer surface, so that their functions may be modulated by the biophysical properties of the membrane. The presence of the anchor appears to impose conformational restraints, and its removal may alter the catalytic properties and structure of a GPI-anchored protein. Release of GPI-anchored proteins from the cell surface by specific phospholipases may play a key role in regulation of their surface expression and functional properties. Reconstitution of GPI-anchored proteins into bilayers of defined phospholipids provides a powerful tool with which to explore the interactions of these proteins with the membrane and investigate how bilayer properties modulate their structure, function, and cleavage by phospholipases.