We have investigated the kinetic mechanism of phosphatidylethanolamine (PE) N-methyltransferase purified from rat liver using PE, phosphatidyl-N-monomethylethanolamine (PMME), and phosphatidyl-N,N-dimethylethanolamine (PDME) as substrates. We previously reported (Ridgway, N. D., and Vance, D. E. (1987) J. Biol. Chem. 262, 17231-17239) that initial velocity curves with PE, PMME, and PDME at a fixed concentration of Triton X-100 were sigmoidal, thus generating nonlinear inverse plots. Comparison with other integral membrane enzymes suggested this response resulted from the enzyme's requirement for a complete boundary layer of phospholipid. Hence, the effect of a nonsubstrate phospholipid on initial velocity patterns for PE, PMME, and PDME was examined. The sigmoidicity of initial velocity curves at constant Triton X-100 concentration and increasing PE, PMME, and PDME were converted to the more familiar hyperbolic response by the addition of egg phosphatidylcholine (PC). Hill coefficients for PE, PMME, and PDME at a fixed Triton concentration were 3.6, 2.5, and 4.7, respectively, but with the addition of 30 or 40 mol % of egg PC, coefficients were close to unity (0.9-1.2). The activation by egg PC of PE, PMME, and PDME methylation indicates that a secondary phospholipid binding site(s) plays a role in catalysis in mixed micelles. This site(s) may represent a transmembrane segment(s) in close association with a boundary layer of phospholipid. Kinetic analysis of initial velocity and product inhibition patterns for PMME and PDME methylation fit an ordered Bi Bi mechanism. Phospholipid substrates and products were the first to bind and the last to dissociate from the active site, respectively. As well, PE, PMME, and PDME compete for a single active site. The overall kinetic scheme for the methylation of PE to PC in mixed micelles involves the initial binding of PE, followed by successive steps where S-adenosyl-L-methionine is bound, the sulfonium methyl group is transferred, and S-adenosyl-L-homocysteine is released.