We have devised a method to determine the true Km of membrane enzymes for hydrophobic substrates dissolved in lipid bilayers, and the lipid/water partition coefficients, by simple steady-state kinetic measurements at varying membrane phospholipid fractional volumes in the assay medium. The method has been applied to mitochondrial ubiquinol cytochrome c reductase, using short-chain ubiquinols as reductants at saturating cytochrome c. The partition coefficients of the quinols, as obtained by this method, are in good agreement with those determined directly by other procedures; Km values obtained by this method, when expressed as concentrations in the lipid bilayer, are in the millimolar range. The kinetics of the ubiquinol analog duroquinol are independent of phospholipid concentration, as expected from its partition coefficient close to unity.