ADP-ribosylation factor (ARF) is a small molecular weight GTP-binding protein (20 kD) and has been implicated in vesicular protein transport. The guanine nucleotide, bound to ARF protein is believed to modulate the activity of ARF but the mechanism of action remains elusive. We have previously reported that ARF binds to Golgi membranes after Brefeldin A-sensitive nucleotide exchange of ARF-bound GDP for GTP gamma S. Here we report that treatment with phosphatidylcholine liposomes effectively removed 40-60% of ARF bound to Golgi membranes with nonhydrolyzable GTP, presumably by competing for binding of activated ARF to lipid bilayers. This revealed the presence of two different pools of ARF on Golgi membranes. Whereas total ARF binding did not appear to be saturable, the liposome-resistant pool is saturable suggesting that this pool of ARF is stabilized by interaction with a Golgi membrane-component. We propose that activation of ARF by a guanine nucleotide-exchange protein results in association of myristoylated ARF GTP with the lipid bilayer of the Golgi apparatus. Once associated with the membrane, activated ARF can diffuse freely to associate stably with a target protein or possibly can be inactivated by a GTPase activating protein (GAP) activity.