CTP:phosphocholine cytidylyltransferase (CCT) plays a key role in the biosynthesis of surfactant phosphatidylcholine. Herein, we investigated the role of its membrane-binding (M) domain in modulating its structure, function and cellular distribution. Multiple EGFP- CCT constructs were generated to evaluate the subcellular distribution in A549 cells. The M-domain targeted CCT to the perinuclear (membrane rich) region. Microinjections with GST fusion protein containing the M domain corroborated the perinuclear targeting. Deletion of the M-domain or substitutions of the hydrophobic residues with arginine/serine in the VEEKS267-277 motif of the M-domain resulted in a nuclear appearance and indented nuclei. Membrane binding of CCT decreased gradually as the number of positive-charged arginine residues increased in the VEEKS motif. To identify whether membrane-protein interactions cause structural alterations in CCT we visualized the protein in the absence and presence of lipids by transmission electron microscopy. These studies revealed that CCT forms a dimer-like complex that condenses upon binding to lipid vesicles, but not lipid monolayers. The influence of the M domain on CCT activity was assessed in transgenic mice overexpressing the N-terminal catalytic domain (CCT1-239), N-terminal catalytic plus M domain (CCT 1-290) or full-length CCT1-367 in fetal type II cells using the SP-C promoter. Only overexpression of CCT 1-367 increased surfactant PtdCho synthesis. Thus, the M-domain influences membrane binding, cellular distribution and topology of CCT, but the domain alone is not sufficient to confer CCT activity in alveolar type II cells in vivo.