Terbinafine (Lamisil®) is a potent and specific inhibitor of fungal squalene epoxidase. Fungi treated with the drug accumulate large quantities of squalene in the form of lipid droplets but, due to its hydrophobicity, squalene partitions also into cellular membranes. Organelle membranes from terbinafine-treatedTrichophytoncells can contain up to 100 times more squalene than found in controls. In artificial phospholipid membranes, squalene destabilizes the bilaminar structure by inducing transition to the inverted micellar HIIphase. Thus, it can be assumed that high squalene concentrations produce disturbances in the structure of cellular membranes and thereby interfere with essential membrane functions. Biochemical and ultrastructural analyses ofTrichophyton mentagrophytestreated with terbinafine have provided evidence of perturbations of vital membrane-associated functions subsequent to squalene accumulation. Synthesis of membrane phospholipids was markedly reduced whereas the rate of degradation of the major membrane phospholipid, phosphatidylcholine, was increased. In cells treated with the drug, the appearance of the vacuoles was significantly altered and the biosynthesis of chitin drastically reduced.