Lysophospholipase transacylase was purified 214,360-fold to homogeneity from the rat liver 100,000 x g supernatant. After DEAE chromatography, total activity increased 12.9-fold, due to the removal of endogenous inhibitors. The inhibitors were isolated and identified as phosphatidic acid and fatty acid. The final preparation showed a single band on SDS-polyacrylamide electrophoresis with an M(r) of 60,000. Gel filtration through Sephacryl S-200 gave a similar value, suggesting that the enzyme exists as a monomer. Activity was highest at pH 6.0 and was not affected by Ca2+, Mg2+, and EDTA. The enzyme produced glycerophosphocholine (GPC), palmitic acid, and dipalmitoyl-GPC on incubation with 1-palmitoyl-GPC, indicating that the enzyme catalyzed both deacylation and transacylation. The relative rates of deacylation and transacylation were 1:0.3 under standard assay conditions. Km for 1-palmitoyl-GPC and Vmax of hydrolase activity were 91 microM and 12.9 mumol/min/mg, respectively. The enzyme was selective for choline lysophospholipid. Ethanolamine, inositol, and serine lysophospholipids were not good substrates of the enzyme. Phosphatidic acid was a potent, competitive inhibitor of the enzyme with Ki of about 10 microM as determined with 1-stearoyl-2-arachidonoyl glycerophosphate. Although less potent, lysophosphatidic acid, palmitoyl-L-carnitine, and fatty acid were also inhibitory to the enzyme.