Activation or inhibition by cytochrome b5 of benzphetamine N-demethylation was studied in micelle-reconstituted systems containing cytochrome P-450 LM2, NADPH-cytochrome P-450 reductase, and dilauroyl-phosphatidylcholine. The effects of cytochrome b5 were critically dependent on both protein:protein and lipid:protein ratios. A 200% stimulation of N-demethylation by cytochrome b5 was obtained at cytochrome P-450 reductase:cytochrome P-450 ratios similar to those in microsomes, compared to only a 20% stimulation at a ratio of 1:1. At lipid:protein ratios less than 50:1, the addition of cytochrome b5 caused significant inhibition of benzphetamine N-demethylation. Such an inhibition could be partially reversed by increasing phospholipid content of micelles and was not seen in vesicle-reconstituted systems at cytochrome b5:cytochrome P-450 ratios of 1:1 or lower. At high cytochrome P-450 reductase:cytochrome P-450 ratios, addition of cytochrome b5 did not alter the efficiency (80%) with which NADPH was utilized: however, at ratios similar to those in microsomes, an increase in efficiency from 42% to 80% was observed. The function of cytochrome b5 was interpreted in terms of a model in which inhibition of cytochrome P-450-mediated reactions results from changes in phospholipid-protein interactions and activation occurs via facilitation of electron transfer between NADPH-cytochrome P-450 reductase and cytochrome P-450 in the membrane.