The principal lipid binding protein in tears, tear lipocalin (TL), binds acid and the fluorescent fatty acid analogs, DAUDA and 16-AP at one site TL compete for this binding site. A fluorescent competitive binding assay revealed that apo-TL has a high affinity for phospholipids and stearic acid (Ki) of 1.2 microM and 1.3 microM, respectively, and much less affinity for cholesterol (Ki) of 15.9 of the hydrocarbon chain. TL binds most strongly the least soluble lipids permitting these lipids to exceed their maximum solubility in aqueous solution. These data implicate TL in solubilizing and transporting lipids in the tear film. Phenylalanine, tyrosine and cysteine+ were substituted for TRP 17, the only invariant residue throughout the lipocalin superfamily. Cysteine substitution resulted in some loss os secondary structure, relaxation of aromatic side chain rigidity, decreased binding affinity for DAUDA and destabilization of structure. Mutants of TL, W17Y, and W17F showed a higher binding affinity for DAUDA than wild-type TL. Comparison of the results of the tryptophan 17 substitution in lipocalin with those of tryptophan 19 substitution in beta-lactoglobulin revealed important differences in binding characteristics that reflect the functional heterogeneity within the lipocalin family.