The lateral diffusion coefficient (D) of cytochrome P-450 (P-450) has been measured in lipid multibilayers with the method of fluorescence recovery after photobleaching. In the liquid-crystal phase of egg phosphatidylcholine (EPC) and dimyristoylphosphatidylcholine (DMPC), the diffusion of P-450 is fast with D about 2 X 10(-8) cm2/s. In DMPC multibilayers, P-450 diffusion dropped by a factor of 20 near the liquid crystal to gel phase transition region, and D is about 5 X 10(-10) cm2/s in the gel phase. A value of 50 mol % of cholesterol reduced the diffusion of P-450 in the liquid-crystal phase only slightly but enhanced the diffusion of P-450 in the gel phase significantly. In EPC membranes, P-450 diffusion underwent a stepwise drop as the cholesterol contents increased from 20 to 30 mol %. With the assumption of a lateral diffusion mediated electron transfer between P-450 and NADPH-P-450 reductase and with D = 2.5 X 10(-8) cm2/s for both enzymes, the reduction rate for P-450 in liposomes was calculated and compared with the reported experimental value.