A phospholipase C/sphingomyelinase from Pseudomonas aeruginosa has been assayed on vesicles containing phosphatidylcholine, sphingomyelin, phosphatidylethanolamine and cholesterol at equimolar ratios. The enzyme activity modifies the bilayer chemical composition giving rise to diacylglycerol (DAG) and ceramide (Cer). Assays of enzyme activity, enzyme-induced aggregation and fusion have been performed. Ultrastructural evidence of vesicle fusion at various stages of the process is presented, based on cryo-EM observations. The two enzyme lipidic end-products, DAG and Cer, have opposite effects on the bilayer physical properties; the former abolishes lateral phase separation, while the latter generates a new gel phase [Sot et al., FEBS Lett. 582, 3230–3236 (2008)]. Addition of either DAG, or Cer, or both to the liposome mixture causes an increase in enzyme binding to the bilayers and a decrease in lag time of hydrolysis. These two lipids also have different effects on the enzyme activity, DAG enhancing enzyme-induced vesicle aggregation and fusion, Cer inhibiting the hydrolytic activity. These effects are explained in terms of the different physical properties of the two lipids. DAG increases bilayers fluidity and decreases lateral separation of lipids, thus increasing enzyme activity and substrate accessibility to the enzyme. Cer has the opposite effect mainly because of its tendency to sequester sphingomyelin, an enzyme substrate, into rigid domains, presumably less accessible to the enzyme.