A study of the lipid polymorphism of aqueous dispersions of stearoyloleoylphosphatidylethanolamine and palmitoyloleoylphosphatidylchloline (95:5, mol/mol) in the presence of the hydrophobic molecule squalene, an intermediate in the biosynthesis of sterols, has been performed. With increasing concentration of squalene the main transition temperature was decreased from 29.8 degrees C for the pure phospholipid system to 28.1 degrees C for samples containing 5 mol% squalene without considerable changes in the phase transition enthalpy as detected by high precision differential scanning calorimetry. The structure of the phospholipid aggregates was determined by small- and wide-angle X-ray diffraction experiments showing only a minor increase of the lamellar repeat distance of the liquid-crystalline phase for the squalene containing samples. By far more pronounced was the effect of squalene on the lamellar-to-inverse-hexagonal phase transition, which was shifted from 64 degrees C to about 36 degrees C in the presence of 6 mol% squalene, thereby overlapping with the main transition. X-ray data showed that the size of the tubes of the inverse hexagonal phase are increasing linearly up to 6 mol% squalene. Experiments performed in the presence of 10 mol% squalene did not further change the phase behaviour, indicating the limiting partition of this hydrophobic molecule into the membrane. The high efficiency of squalene to promote the formation of the inverse hexagonal phase is discussed along the lines of argument based on the model of Kirk et al. (Kirk, G.L., Gruner, S.M. and Stein, D.E. (1984) Biochemistry 23, 1093-1102).