Phosphatidylserine (PS) is synthesized in mammalian cells by two distinct serine-exchange enzymes, phosphatidylserine synthase-1 and -2. We recently demonstrated that mice lacking PS synthase-2 develop normally and exhibit no overt abnormalities [Bergo et al., (2002) J. Biol. Chem. 277:47701-47708]. We now show that PS synthase-2 mRNA levels are up to 80-fold higher in livers of embryos than in adults. Despite reduced serine-exchange activity in several tissues of PS synthase-2 deficient mice, the phospholipid composition of mitochondria and microsomes from these tissues is normal. Although PS synthase-2 is highly expressed in neurons, axon extension of cultured sympathetic neurons is not impaired by PS synthase-2 deficiency. We hypothesized that mice compensate for PS synthase-2 deficiency by modifying their phospholipid metabolism. Our data show that the rate of PS synthesis in hepatocytes is not reduced by PS synthase-2 deficiency but PS synthase-1 activity is increased. Moreover, PS degradation is decreased by PS synthase-2 deficiency, probably as a result of decreased PS degradation via phospholipases rather than decreased PS decarboxylation. These experiments underscore the idea that cellular phospholipid composition is tightly controlled and show that PS synthase-2-deficient hepatocytes modify phospholipid metabolism by several compensatory mechanisms to maintain phospholipid homeostasis.