GDP/GTP exchange modulates the interaction of the small G-protein ADP-ribosylation factor-1 with membrane lipids: if ARF(GDP) is mostly soluble, ARF(GTP) binds tightly to lipid vesicles. Previous studies have shown that this GTP-dependent binding persists upon removal of the N-terminal myristate but is abolished following further deletion of the 17 N-terminal residues. This suggests a role for this amphipathic peptide in lipid membrane binding. In the ARF(GDP) crystal structure, the 2-13 peptide is helical, with its hydrophobic residues buried in the protein core. When ARF switches to the GTP state, these residues may insert into membrane lipids. We have studied the binding of ARF to model unilamellar vesicles of defined composition. ARF(GDP) binds weakly to vesicles through hydrophobic interaction of the myristate and electrostatic interaction of cationic residues with anionic lipids. Phosphatidylinositol 4,5-bis(phosphate) shows no specific effects other than strictly electrostatic. By using fluorescence energy transfer, the strength of the ARF(GTP)-lipid interaction is assessed via the dissociation rate of ARF(GTPgammaS) from labeled lipid vesicles. ARF(GTPgammaS) dissociates slowly (tau(off) approximately 75 s) from neutral PC vesicles. Including 30% anionic phospholipids increases tau(off) by only 3-fold. Reducing the N-terminal peptide hydrophobicity by point mutations had larger effects: F9A and L8A-F9A substitutions accelerate the dissociation of ARF(GTPgammaS) from vesicles by factors of 7 and 100, respectively. This strongly suggests that, upon GDP/GTP exchange, the N-terminal helix is released from the protein core so its hydrophobic residues can interact with membrane phospholipids.