The three purified proteins which are required for microsomal stearyl-CoA desaturation, NADH-cytochrome b5 reductase, cytochrome b5, and desaturase, have been combined with egg lecithin or dimyristyl lecithin vesicles to reconstruct a functional electron transport system capable of utilizing NADH and O2 in the desaturation of stearyl-CoA. Such preparations appear to consist of phospholipid vesicles which contain the three proteins bound to the outer surface of the vesicles. Acyl-CoA derivatives containing 12 to 19 carbon fatty acyl chains are required for desaturase activity while derivatives containing 9 to 20 carbons are capable of binding to the enzyme. Shorter chain acyl-CoA derivatives, free CoA, and free fatty acids do not appear to bind to the enzyme. Inhibition and analog studies suggest that the methylene chain of stearyl-CoA assumes an eclipsed ("gauche") conformation at carbon atoms 9,10 in the enzyme-substrate complex. Furthermore, isotope rate effects obtained with deuterated stearyl-CoA derivatives indicate that hydrogen removal is the rate-limiting step of desaturation. Stearyl-CoA binds to pure liposomes and desaturase-containing liposomes, and it is this form of stearyl-CoA which appears to be the substrate for desaturase. The Arrhenius plots of desaturase activity obtained using desaturase bound to egg lecithin liposomes, in which the liquid crystalline to crystalline phase transition temperature is -5 degrees, was linear between 15 and 35 degrees, while that obtained using desaturase bound to dimyristyl lecithin liposomes showed a break at 24 degrees coinciding with the liquid crystalline to crystalline phase transition temperature for this lipid. The decrease observed in the deuterium isotope rate effect below the transition temperature indicates that a step in the reaction sequence other than hydrogen abstraction becomes rate-limiting when the lipid is in the crystalline state. In this system translational diffusion does not emerge as the rate-limiting step. The liposomes contained sufficient reductase and cytochrome b5 so that translational diffusion was not rate-limiting.