Liposomes bearing different net surface charges have been prepared and their ability to entrap the Ca2+-activated photoprotein, obelin, has been studied 2. Negatively-charged liposomes, composed of egg-yolk lecithin, cholesterol and phosphatidylserine, consistently produced the most homogeneous populations of liposomes after sonication, as shown by electron microscopy after negative staining. These consisted of a large proportion of uni- and bilamellar vesicles within the size range of 20--50 nm, external diameter. 3. Sonicated negatively-charged liposomes had a mean aqueous obelin space of 6.8 +/- 0.8 microliter/mumol of phospholipid compared to a mean space for inulin [14C]carboxylic acid of 5.1 +/- 0.8 microliter/mumol of phospholipid. 4. Sonication reduced the Ca2+ permeability of the negatively-charged liposomes, as measured by the utilization of entrapped obelin. 5. Preparations of uncharged (no phosphatidylserine) and positively-charged (stearylamine instead of phosphatidylserine), sonicated liposomes contained a greater proportion of larger vesicles, which were more permeable to Ca2+ than sonicated, negatively-charged liposomes. 6. Obelin, trapped within sonicated, negatively-charged liposomes, responded to increases in the free Ca2+ concentration within the liposomes caused by the bivalent-cation ionophore A23187 at concentrations as low as 19 nM. 7. The effect of A23187 was inhibited by Mg2+ at a low concentration of Ca2+ (10 muM), but not at 1 mM Ca2+. 8. It was concluded that obelin could be trapped in the aqueous compartment of sonicated liposomes which remained relatively impermeable to Ca2+. Furthermore, trapped obelin could respond to changes in the free Ca2+ concentration within these liposomes.