The effect of IAA on apical dominance in apple buds was examined in relation to changes in proton density (free water) and membrane lipid composition in lateral buds. Decapitation induced budbreak and enhanced lateral bud growth. IAA replaced apical control of lateral buds and maintained paradormancy. Maximal inhibition was obtained when IAA was applied immediately after the apical bud was removed; delaying application reduced the effect of IAA. An increase in proton density in lateral buds was observed 2 days after decapitation, whereas the change in membrane lipid composition occurred 4 days later. Removing the terminal bud increased membrane galacto- and phospholipids and the ratio of unsaturated to corresponding saturated fatty acids. Decapitation also decreased the ratio of free sterols to phospholipids in lateral buds. Applying thidiazuron to lateral buds of decapitated shoots enhanced these effects, whereas applying IAA to the terminal end of decapitated shoots inhibited the increase of proton density and prevented changes in membrane lipid composition in lateral buds. These results suggest that change in water movement alters membrane lipid composition and then induces lateral bud growth. IAA, presumably produced by the terminal bud, restricts the movement of water to lateral buds and inhibits their growth in apple.