Most of the mechanistic studies of tyrosine nitration have been performed in aqueous solution. However, many protein tyrosine residues shown to be nitrated in vitro and in vivo are associated to nonpolar compartments. In this work, we have used the stable hydrophobic tyrosine analogue N-t-BOC-L-tyrosine tert-butyl ester (BTBE) incorporated into phosphatidylcholine (PC) liposomes to study physicochemical and biochemical factors that control peroxynitrite-dependent tyrosine nitration in phospholipid bilayers. Peroxynitrite leads to maximum 3-nitro-BTBE yields (3%) at pH 7.4. In addition, small amounts of 3,3'-di-BTBE were formed at pH 7.4 (0.02%) which increased over alkaline pH; at pH 6, a hydroxylated derivative of BTBE was identified by HPLC-MS analysis. BTBE nitration yields were similar in dilauroyl- and dimyristoyl-PC and were also significant in the polyunsaturated fatty acid-containing egg PC. *OH and *NO2 scavengers inhibited BTBE nitration. In contrast to tyrosine in the aqueous phase, the presence of CO2 decreased BTBE nitration, indicating that CO3*- cannot permeate to the compartment where BTBE is located. On the other hand, micromolar concentrations of hemin and Mn-tccp strongly enhanced BTBE nitration. Electron spin resonance (ESR) detection of the BTBE phenoxyl radical and kinetic modeling of the pH profiles of BTBE nitration and dimerization were in full agreement with a free radical mechanism of oxidation initiated by ONOOH homolysis in the immediacy of or even inside the bilayer and with a diffusion coefficient of BTBE phenoxyl radical 100 times less than for the aqueous phase tyrosyl radical. BTBE was successfully applied as a hydrophobic probe to study nitration mechanisms and will serve to study factors controlling protein and lipid nitration in biomembranes and lipoproteins.