To shed light on the driving force for the hydrophobic effect that partitions amphiphilic lipoproteins between water and membrane, we carried out an atomically detailed thermodynamic analysis of a triply lipid modified H-ras heptapeptide anchor (ANCH) in water and in a DMPC (1,2-dimyristoyl-sn-glycero-3-phosphocholine) bilayer. Combining molecular mechanical and continuum solvent approaches with an improved technique for solute entropy calculation, we obtained an overall transfer free energy of approximately -13 kcal mol(-1). This value is in qualitative agreement with free energy changes derived from a potential of mean force calculation and indirect experimental observations. Changes in free energies of solvation and ANCH conformational reorganization are unfavorable, whereas ANCH-DMPC interactions-especially van der Waals-favor insertion. These results are consistent with an enthalpy-driven hydrophobic effect, in accord with earlier calorimetric data on the membrane partition of other amphiphiles. Furthermore, structural and entropic analysis of molecular dynamics-generated ensembles suggests that conformational selection may play a hitherto unappreciated role in membrane insertion of lipid-modified peptides and proteins.