A new terrylene diimide-based dye (WS-TDI) that is soluble in water has been synthesized, and its photophysical properties are characterized. WS-TDI forms nonfluorescing H-aggregates in water that show absorption bands being blue-shifted with respect to those of the fluorescing monomeric form. The ratio of monomeric WS-TDI to aggregated WS-TDI was determined to be 1 in 14 400 from fluorescence correlation spectroscopy (FCS) measurements, suggesting the presence of a large amount of soluble, nonfluorescent aggregates in water. The presence of a surfactant such as Pluronic P123 or CTAB leads to the disruption of the aggregates due to the formation of monomers in micelles. This is accompanied by a strong increase in fluorescence. A single molecule study of WS-TDI in polymeric films of PVA and PMMA g reveals excellent photostability with respect to photobleaching, far above the photostability of other common water-soluble dyes, such as oxazine-1, sulforhodamine-13, and a water-soluble perylenediimide derivative. Furthermore, labeling of a single protein such as avidin is demonstrated by FCS and single molecule photostability measurements. The high tendency of WS-TDI to form nonfluorescent aggregates in water in connection with its high affinity to lipophilic environments is used for the fluorescence labeling of lipid membranes and membrane containing compartments such as artificial liposomes or endosomes in living HeLa cells. The superior fluorescence imaging quality of WS-TDI in such applications is demonstrated in comparison to other well-known membrane staining dyes such as Alexa647 conjugated with dextran and FM 4-64 lipophilic styryl dye.