I-C, an endogenous cytoplasmic inhibitor of vacuolar carboxypeptidase Y in the yeast Saccharomyces cerevisiae, is classified as a member of the phosphatidylethanolamine-binding protein family. The binding of I-C to phospholipid membranes was first analyzed using a liposome-binding assay and by surface plasmon resonance measurements, which revealed that the affinity of this inhibitor was not for phosphatidylethanolamine but for anionic phospholipids, such as phosphatidylserine, phosphatidylinositol 3-phosphate, phosphatidylinositol 3,4-bisphosphate, and phosphatidylinositol 3,4,5-trisphosphate, with K-D values below 100 nM. The liposome-binding assay and surface plasmon resonance analyses of I-C, when complexed with carboxypeptidase Y, and the mutant forms of I-C further suggest that the N-terminal segment (Met1-His18) in its carboxypeptidase Y-binding sites is involved in the specific and efficient binding to anionic phospholipid membranes. The binding of I-C to cellular membranes was subsequently analyzed by fluorescence microscopy of yeast cells producing the green fluorescent protein-tagged I-C, suggesting that I-C is specifically targeted to vacuolar membranes rather than cytoplasmic membranes, during the stationary growth phase. The present findings provide novel insights into the membrane-targeting and biological functions of I-C and phosphatidylethanolamine-binding proteins.