The model transmembrane peptide P16 (Ac-KKGLLLALLLLALLLALLLKKA-NH2) was incorporated into small unaligned phospholipid bicelles, which provide a `native-like' lipid bilayer compatible with high-resolution solution NMR techniques. Using amide-water chemical exchange and amide-lipid cross-relaxation measurements, the interactions between P16 and bicelles were investigated. Distinctive intermolecular NOE patterns observed in band-selective 2D-NOESY spectra of bicellar solutions with several lipid deuteration schemes indicated that P16 is preferentially interacting with the `bilayered' region of the bicelle rather than with the rim. Furthermore, when amide-lipid NOEs were combined with amide-water chemical exchange cross-peaks of selectively N-15-labeled P16 peptides, valuable information was obtained about the position of selected residues relative to the membrane-water interface. Specifically, three main classes were identified. Class I residues lie outside the bilayer and show amide-water exchange cross-peaks but no amide-lipid NOEs. Class II residues reside in the bilayer-water interface and show both amide-water exchange cross-peaks and amide-lipid NOEs. Class III residues are embedded within the hydrophobic core of the membrane and show no amide-water exchange cross-peaks but strong amide-lipid NOEs.