Reactions of N-demethylation, p-hydroxylation and N-oxidation of one substrate, i.e. dimethylaniline, have been used to show that the activating effect of Mg(2+) takes place only in the first two reactions. 2. An increase in V(max.) of N-demethylation of dimethylaniline is accompanied by an increase in K(m). In the p-hydroxylation of dimethylaniline V(max.) increases whereas K(m) does not change. A comparison of the changes in the K(m) values of these reactions with the change in K(s) shows that in both cases K(m) does not characterize the affinity of cytochrome P-450 for dimethylaniline. 3. The rate-limiting site of N-demethylation and p-hydroxylation of dimethylaniline, as well as the total rate of NADPH oxidation in the presence of dimethylaniline, is between cytochromes b(5) and P-450. Addition of Mg(2+) to the incubation medium changes the hydrophobic environment of phosphatidylcholine in the membrane, the process being accompanied by a sharp increase in the fluorescence quantum yield of 8-anilinonaphthalene-1-sulphonate.