Time-resolved fluorescence anisotropy and lifetime measurements on the dye 3,3’-diethyloxadicarbocyanine iodide in phospholipid/cholate mixtures have been carried out. The different populations of the dye were resolved by virtue of the difference in their microenvironmental emission behavior. Rotational dynamics of the dye in cholate/phospholipid mixtures show that gradual removal of cholate from the medium leads to a large increase in rotational correlation time corresponding to formation of large vesicles. The lamellar-micellar transition takes place near the critical micellar concentration (CMC) of cholate. The mechanism of stepwise formation of lipid vesicles on removal of cholate could readily be reconciled with the mechanism of membrane protein reconstitution into lipid vesicles by the cholate dialysis method.