Sonicated unilamellar liposomes containing phosphatidylethanolamine and palmitoylhomocysteine fuse rapidly when the medium pH is lowered from 7 to 5. Liposome fusion was demonstrated by (i) mixing of the liposomal lipids as shown by resonance energy transfer, (ii) gel filtration, and (iii) electron microscopy. The pH-sensitive fusion of liposomes was observed only when palmitoylhomocysteine (greater than or equal to 20 mol%) was present in the liposomes. The presence of phosphatidyl-ethanolamine in the liposomes greatly enhanced fusion whereas the presence of phosphatidylcholine inhibited fusion. During fusion of liposomes containing phosphatidylethanolamine and palmitoylhomocysteine (8:2, mol/mol), almost all of the encapsulated calcein was released. Inclusion of cholesterol (40 mol%) in the liposomes substantially decreased leakage without impairing fusion.