In the presence of CMP, cholinephosphotransferase of mouse lung microsomes catalyzes the conversion of endogenous phosphatidylcholines into 1,2-diacyl-sn-glycerols and CDPcholine. 2. In this conversion cholinephosphotransferase shows a distinct preference for those molecular species of phosphatidylcholine which contain an unsaturated fatty acid. The enzyme hardly utilizes endogenous depalmitoylglycerophosphocholine as a substrate. 3. Membrane-bound 1,2-diacyl-sn-glycerols were also prepared by treatment of mouse lung microsomes with a pure phospholipase C from Bacillus cereus. These 1,2-diacyl-sn-glycerols were subsequently utilized as substrate by cholinephosphotransferase in the formation of phosphatidylcholine. In the latter reaction, cholinephosphotransferase exhibited a pronounced preference for unsaturated 1,2-diacyl-sn-glycerols and hardly utilized the endogenous 1,2-depalmitoyl-sn-glycerol. 4. The low affinity of cholinephosphotransferase for either dipalmitoylglycerophosphocholine or 1,2-dip