Genetic analysis suggests that the TGD2 protein of Arabidopsis is required for the biosynthesis of endoplasmic reticulum derived thylakoid lipids. TGD2 is proposed to be the substrate-binding protein of a presumed lipid transporter consisting of the TGD1 (permease) and TGD3 (ATPase) proteins. The TGD1, -2, and -3 proteins are localized in the inner chloroplast envelope membrane. TGD2 appears to be anchored with an N-terminal membrane-spanning domain into the inner envelope membrane, whereas the C-terminal domain faces the intermembrane space. It was previously shown that the C-terminal domain of TGD2 binds phosphatidic acid (PtdOH). To investigate the PtdOH binding site of TGD2 in detail, the C-terminal domain of the TGD2 sequence lacking the transit peptide and transmembrane sequences was fused to the C terminus of the Discosoma sp. red fluorescent protein (DR). This greatly improved the solubility of the resulting DR-TGD2C fusion protein following production in Escherichia coli. The DR-TGD2C protein bound PtdOH with high specificity, as demonstrated by membrane lipid-protein overlay and liposome association assays. Internal deletion and truncation mutagenesis identified a previously undescribed minimal 25-amino acid fragment in the C-terminal domain of TGD2 that is sufficient for PtdOH binding. Binding characteristics of this 25-mer were distinctly different from those of TGD2C, suggesting that additional sequences of TGD2 providing the proper context for this 25-mer are needed for wild type-like PtdOH binding.