The incorporation of caproic acid in the sn-1 position of phosphatidylcholine (PC) catalyzed by lipase from Rhizopus oryzae was investigated in a water activity-controlled organic medium. The reaction was carried out either as esterification or transesterification. A comparison between these two reaction modes was made with regard to product yield, product purity, reaction time, and byproduct formation as a consequence of acyl migration. The yield in the esterification and transesterification reaction was the same under identical conditions. The highest yield (78%) was obtained at a water activity (aw) of 0.11 and a caproic acid concentration of 0.8 M. The reaction time was shorter in the esterification reaction than in the transesterification reaction. The difference in reaction time was especially pronounced at low water activities and high fatty acid concentrations. The loss in yield due to acyl migration and consequent enzymatic side reactions was around 16% under a wide range of conditions. The incorporation of a fatty acid in the sn-1 position of PC proved to be thermodynamically much more favorable than the incorporation of a fatty acid in the sn-2 position. © 2002 Wiley Periodicals, Inc. Biotechnol Bioeng 78: 403–411, 2002.