We have studied the molecular mechanism of Ca-ATPase activation in sarcoplasmic reticulum (SR) by the volatile anesthetic halothane. Using time-resolved phosphorescence anisotropy, we determined the rotational correlation times and mole fractions of different oligomeric states of the enzyme, as a function of halothane and temperature. Lipid fluidity was measured independently, using EPR of spin-labeled lipids. At 4 and 7 °C, the principal effects of halothane were to increase the activity of the Ca-ATPase and to promote the formation of monomers and dimers of the enzyme from larger aggregates. At higher temperatures (up to 25 °C), halothane activated the enzyme, but to a lesser extent than observed at lower temperatures. While the functional effects of halothane were temperature dependent, the effects of halothane on lipid fluidity and protein aggregation state were similar at all temperatures tested. We conclude that at low temperatures Ca-ATPase activity is dominated by aggregation state, so halothane activates the enzyme primarily by promoting the formation of monomers and dimers of the enzyme from larger aggregates. At higher temperatures, the activity of the enzyme is dominated by lipid fluidity, so halothane activates the enzyme by increasing the lipid fluidity. The physical mechanism of Ca-ATPase activation, dominated by aggregation state at low temperature and lipid fluidity at higher temperature, provides an explanation for the break in the Arrhenius plot of Ca-ATPase activity (in the absence of halothane) at approximately 20 °C.