Fourier transform infrared (FTIR) and time-resolved fluorescence spectroscopy have been employed to examine the structural dynamics of lipid fatty acyl chains and lipid/water interfacial region of a binary lipid mixture containing unsaturated phosphatidylethanolamine (PE) and diacylglycerol (DG). Infrared vibrational frequencies of the CH2 symmetric stretching and the C O stretching bands of the lipids were neasured at different lipid compositions and temperatures. For 0% DG, the lamellar gel to lamellar liquid crystalline (Lβ-Lα) and the Lα to inverted hexagonal (Lα-HIl) phase transitions were observed at ≈ 15° and 55°C, respectively. As the DG content increased gradually from 0% to 15%, the Lα-HII phase transition temperature decreased drastically while the Lβ-Lα phase transition temperature decreased only slightly. At 10% DG, a merge of these two phase transitions was noticed at ≈ 10°C. For the composition study at 23°C, the Lα-HIl transition occurred at ≈6-10% DG as indicated by abrupt increase in both the CH2 and C O streching frequencies at those DG contents. Using time-resolved fluorescence spectroscopy, abrupt decreases in both the normalized long time residual and the initial slope of the anisotropy decay function of lipid probes, 1-palmitoyl-2-[[2-[4-(6-phenyl-trans-1,3,5-hexatrienyl)phenyl]ethyl]carbonyl]-3-sn-phosphatidylcholine, in these PE/DG mixtures were observed at the Lα-HII phase transition. These changes in the anisotropy decay parameters suggested that the rotational dynamics and orientational packing of the lipids were altered at the composition-induced Lα-HII transition, and agreed with a previous temprature-induced Lα-HII transition study on pure unsaturated PE (Cheng (1989) Biophys. J. 55, 1025-1031). The fluorescence lifetime of water soluble probes, 8,1-anilinonapthalenes sulfonate acid, in PE/DG mixtures increased abruptly at the Lα-HII phase transition, suggesting that the conformation and hydration of the lipid/water interfacial region also undergo significant changes at the Lα-HIl transition.