Protein-protein interactions are essential in almost all biological processes, extending from the formation of cellular macromolecular structures and enzymatic complexes to the regulation of signal transduction pathways. It is assumed that approximately one-third of all proteins in eukaryotic cells are membrane associated. Because of their hydrophobic nature, the analysis of membrane-protein interactions is difficult to be studied in a conventional two-hybrid assay. We described here a new genetic method for in vivo detection of membrane-protein interactions in the budding yeast Saccharomyces cerevisiae. The system uses the split-ubiquitin approach based on the detection of the in vivo processing of a reconstituted split ubiquitin. On interaction of X and Y proteins, ubiquitin reconstitution occurs and leads to the proteolytic cleavage and subsequent release of a transcription factor that triggers the activation of a reporter system enabling easy detection. In this manner, and in contrast to the conventional yeast-two hybrid system in which interactions occur in the nucleus, the membrane-based yeast two-hybrid system represents an in vivo system that detects interactions between membrane proteins in their natural environment.