Arbutin is a glycosylated hydroquinone found at high concentrations in certain plants capable of surviving extreme and sustained dehydration. In this paper, we examine a potential role of this molecule in anhydrobiosis. We have studied its effects on the physical properties of phospholipids and on preservation of liposomes during drying. Arbutin depresses the gel to liquid crystalline phase transition temperature of dry phospholipids, as measured by differential scanning calorimetry, with a pattern similar to that seen in phospholipids dried with the disaccharide trehalose. Unlike trehalose, however, arbutin does not protect dry liposomes from leaking their contents. Also, using Fourier transform infrared spectroscopy, we found an increase in the vibrational frequency of the phosphate asymmetric stretch in partially hydrated phospholipids in the presence of arbutin. Trehalose, by contrast, depresses the frequency of the phosphate in dry phospholipids, indicating that the modes of interaction of trehalose and arbutin with the bilayer are different. Previously, we have shown that phospholipases can be active in liposomes with surprisingly low water contents. Based on the structural similarity of arbutin to a known inhibitor of phospholipase A 2 (PLA 2), it appeared possible that arbutin might serve as an inhibitor of phospholipases. Liposomes of varying composition were lyophilized in the presence and absence of phospholipases. When the liposomes were partially rehydrated at 76% relative humidity, arbutin inhibited PLA 2, but did not inhibit phospholipases B or C. Accumulation of enzyme product in the liposome membranes was measured by analytical thin layer chromatography, and was taken as a measure of enzyme activity. Arbutin did not inhibit any of the enzymes in the presence of excess water. Based on these data, hypotheses are presented concerning the mechanism of PLA 2 inhibition by arbutin in the mostly dehydrated state.