Mutants of Escherichia coli defective in diglyceride kinase contain 10 to 20 times more sn-1,2-diglyceride than normal cells. This material constitutes about 8% of the total lipid in such strains. We now report that this excess diglyceride is recovered in the particulate fraction, primarily in association with the inner, cytoplasmic membrane. The diglyceride kinase of wild-type cells was recovered in the same inner membrane fractions. The conditions employed for the preparation of the membranes did not appear to cause significant redistribution of lipids and proteins. The biochemical reactions leading to the formation of diglyceride in E. coli are not known. To determine whether diglyceride formation requires concurrent synthesis of the membrane-derived oligosaccharides (H. Schulman and E. P. Kennedy, J. Biol. Chem. 252:4250-4255, 1977), we have constructed a double mutant defective in both the kinase (dgk) and phosphoglucose isomerase (pgi). When oligosaccharide synthesis was inhibited in this organism by growing the cells on amino acids as the sole carbon source, the diglyceride was no longer present in large amounts. When glucose was also added to the medium, the pgi mutation was bypassed, oligosaccharide synthesis resumed, and diglyceride again accumulated. These findings suggest that diglyceride may arise during the transfer of the sn-glycero-1-P moiety from phosphatidylglycerol (and possibly cardiolipin) to the oligosaccharides. In wild-type cells the kinase permits the cyclical reutilization of diglyceride molecules for phospholipid biosynthesis.