Decay-accelerating factor (DAF) is a C regulatory protein which functions in membranes to inhibit autologous C activation on cell surfaces. A liposome model was used to study the mechanism of DAF action and examine the effects of membrane-bound glycophorin and LPS on the regulatory activity of DAF. Liposomes were incubated in MgEGTA-treated human serum and activation of the alternative pathway measured by C3b binding. Liposomes composed of phosphatidylcholine, phosphatidylethanolamine, and cholesterol activated the alternative pathway in proportion to their content of PE. Incorporation of 10(-7) mol/mol phospholipid of either human E or HeLa cell-derived DAF inhibited C activation by liposomes containing 40% phosphatidylethanolamine by 50%, an efficiency comparable to that observed in intact E. HeLa DAF that had been treated with phosphatidylinositol-specific phospholipase C to remove its glycolipid anchor had no effect on C activation by liposomes at concentrations as high as 10(-5) mol/mol phospholipid. Incorporation of DAF into liposomes prepared with bound C3b inhibited the deposition of additional C3b by C3bBbP. However, the incorporated DAF increased the amount of Bb generated from B in the presence of D indicating that accelerated decay of the convertase was the primary effect of DAF. Similarly, treatment of intact human E with anti-DAF decreased the amount of Bb generated by the alternative pathway convertase. To study the effects of other membrane components on DAF activity, liposomes were prepared with purified human glycophorin A or LPS. In glycophorin liposomes the presence of PE was required to activate the alternative pathway and DAF inhibited this activation. In contrast, LPS liposomes bound C3b independently of PE and the incorporation of DAF had no effect. These results demonstrate that within a membrane, DAF's inhibitory activity on the alternative pathway C3 convertase is mediated independently of other membrane proteins, that in this model the major activity of DAF is to accelerate convertase decay, and that the presence of other membrane molecules that may serve as C3 acceptors can circumvent DAF function.