The cytoplasmic domain of the T cell receptor zeta subunit (zeta(cyt)) is sufficient to couple receptor ligation to intracellular signaling cascades, but little is known about its structure or mechanism of signaling. In aqueous solution, zeta(cyt) is unstructured. Here we report that in the presence of lipid vesicles zeta(cyt) assumes a folded structure. The folding transition is reversible and dependent on the presence of acidic phospholipids. In the lipid-bound conformation, zeta(cyt) is refractory to phosphorylation by src family tyrosine kinases, which are believed to play a key role in signal initiation in vivo. In the lipid-free, unstructured form, zeta(cyt) is readily phosphorylated, and phospho-zeta cyt exhibits neither membrane association nor structure induction. The conformational change may provide a mechanism for coupling receptor clustering to cytoplasmic signaling events.