We investigate permeation of three blocked dipeptides with different side chain polarity across a phospholipid membrane and their behavior at the water-membrane interface by way of molecular dynamics simulations. Hydrophilic serine-serine dipeptide is found to desorb from the interface to aqueous phase, whereas hydrophobic phenylalanine-leucine and amphiphilic serine-leucine tend to accumulate at the interface with a free energy minimum of -3 kcal/mol. All three dipeptides exhibit free energy barriers to permeation across the membrane located at the center of the bilayer. The height of the barrier is strongly sequence dependent and increases with the dipeptide polarity. It is equal to 3.5, 6.4, and 10.0 kcal/mol for phenylalanine-leucine, serine-leucine, and serineserine, respectively. The corresponding permeability coefficients are equal to 4.6 X 10(-3), 4.5 X 10(-5), and 8.7 X 10(-8) cm/s. The apparent insensitivity of membrane permeability to hydrophobicity of dipeptides, found in some experiments, is attributed to neglecting corrections for unstirred water layers near membrane surface, which are significant for hydrophobic species. Different hydrophobicity of the dipeptides also influences their conformations and orientations, both at the interface and inside the membrane. In particular, penetration of hydrophilic serine-serine dipeptide causes the formation of water-filled defects in the bilayer. These results are relevant to the delivery of peptide-based therapeutic agents.