In recent years, a large number of proteins having covalently linked myristic and palmitic acids have been discovered. It is assumed that fatty acid acylation serves to anchor proteins to membranes. However, it is not clear whether fatty acids modulate orientation of peptide chain in membranes or help in associating hydrophilic segments of peptides with membranes. We have examined the aggregation properties and membrane association of peptides corresponding to myristoylation and palmitoylation regions of proteins by fluorescence spectroscopy. Both acylated and non-acylated peptides were used for investigation. Binding of the peptides to lipid vesicles was assessed by monitoring the fluorescence of tryptophan as well as the quenching of its fluorescence in the presence of quenchers like I- and acrylamide. Our results indicate that in the peptide corresponding to a transmembrane segment, palmitoylation results in a change in the orientation of the peptide chain in the lipid bilayer. In the case of peptides that do not have a hydrophobic segment, acylation with palmitic or myristic acid does not appear to result in increased binding to lipid bilayer. Our results suggest that (i) the primary role of myristoylation may not be an anchor for membrane attachment as assumed, (ii) palmitoylation in the case of proteins having transmembrane segments may serve to realign the transmembrane segment from the normal orientation perpendicular to the bilayer surface, (iii) in the case of proteins where there is no hydrophobic segment, palmitoylation may not serve as a membrane anchor and could be involved in interaction with other membrane-bound proteins.