The behaviour of highly purified glucosylceramide beta-glucosidase (glucosylceramidase, EC 3.2.1.45) from human placenta [Furbish, F. S., Blair, H. E., Shiloach, J., Pentchev, P. G. & Brady, R. B. (1977) Proc. Natl Acad. Sci. USA 74, 3560-3563] was investigated in the absence of detergents with structurally modified glucosylceramides inserted into unilamellar liposomes. The reaction between the water-soluble enzyme and the liposomal substrates was significantly dependent on the structure of the lipophilic aglycon moiety of glycolipids: glucosyl-N-acetyl-sphingosines (D-erythro and L-threo) were better substrates than the corresponding glucosylceramides. The L-threo derivatives were poorer substrates with higher apparent Km values than the corresponding D-erythro derivatives. For glucosyl-3-keto-ceramide and glucosyl-dihydro-ceramide (D-erythro), higher Km values were found than for glucosylceramide. Sphingosine, glucosylsphingosine and glucosyl-N-acetyl-sphingosine were the most effective inhibitors of the hydrolysis of glucosylceramide. D-erythro-Ceramide and D-galactosyl-N-acetyl-D-erythro-sphingosine inhibited the hydrolysis of amphiphilic glucosylceramide but not that of water-soluble 4-methyl-umbelliferyl-beta-glucoside, suggesting a hydrophobic binding site of the enzyme for the aglycon moiety of its membrane-bound substrate. Dilution experiments suggested that at least a fraction of the enzyme associates with the liposomes and degrades the lipid substrate even in the absence of activator proteins. Acidic phospholipids incorporated into liposomes caused a powerful stimulation (30-40-fold) of the glucosylceramide beta-glucosidase, whereas acidic sphingolipids (sulphatide, gangliosides GM1 and GD1a) incorporated into liposomes stimulated this enzyme only moderately (3-10-fold).