Hydrolysis of phospholipid in erythrocyte membranes by phospholipase C (Cl. perfringens or B. cereus) leads to the formation of membrane-attached droplets which contain at least some of the lipid products of hydrolysis and possibly other membrane lipids which can no longer be retained in the phospholipid-depleted membranes. A similar effect is observed when isolated membrane lipids are treated with phospholipase C and appears to represent a phase separation resulting from the change in lipid composition. Droplets and residual membranes have been isolated from phospholipase C-modified preparations for chemical analysis. The structural parameters of the residual membranes as observed by electron microscopy and by low angle X-ray diffraction appear to be little changed. This suggests that the residual lipid is able to condense to maintain molecular continuity within the membrane and that the protein components are also able to condense laterally so as not to change the membrane thickness, although they probably do contribute to a change in electron-density distribution which is detected in the X-ray diffraction studies. These observations are further discussed in relation to recent reports on molecular parameters of specific membrane components and suggestions concerning molecular distributions within the membrane.