Attempts to measure the function of red blood cells as steroid metabolizing tissue showed that the membrane plays an important role. Of the 17beta-estradiol associated with red cells, 2/3 was bound to the membrane while 1/3 was in the soluble fraction. The binding appears to be nonspecific and linearly related to the amount incubated. Binding was more extensive at 2 C than at 26 C. Successive washes of red cells with isotonic sodium chloride solution increased their ability to bind 17beta-estradiol. Red cells incubated in isotonic salt media removed 85.1 plus or minus 3.2% (SD) of the total estrogens present and this value remained within narrow limits for incubation times as short as 15 s and as long as 19 h at 37 C. When incubated in homologous plasma, only 8-12% of estrogens in the media became associated with cells. The eight-fold difference in cell binding between salt solution and plasma can be attributed to competition with plasm aproteins. Presence of plasma proteins diminished but does not prevent activity of 17beta-hydroxysteroid dehydrogenase of red cells. Cells produce four times more estrone when incubated in saline media than when incubated in their own plasma. The enzyme is in the soluble portion of the cells and the steroids have to traverse the membrane in both directions. In the transfer of estrogens from plasma of cytoplasm, the membrane needs to be considered as a separate compartment.