Bloodstream forms of Trypanosoma brucei contain a glycosylphosphatidylinositol-specific phospholipase C (GPI-PLC) that cleaves the GPI-anchor of the variable surface glycoprotein (VSG). Its location in trypanosomes has been controversial. Here, using confocal microscopy and surface labelling techniques, we show that the GPI-PLC is located exclusively in a linear array on the outside of the flagellar membrane, close to the flagellar attachment zone, but does not co-localize with the flagellar attachment zone protein, FAZ1. Consequently, the GPI-PLC and the VSG occupy the same plasma membrane leaflet, which resolves the topological problem associated with the cleavage reaction if the VSG and the GPI-PLC were on opposite sides of the membrane. The exterior location requires the enzyme to be tightly regulated to prevent VSG release under basal conditions. During stimulated VSG release in intact cells, the GPI-PLC did not change location, suggesting that the release mechanism involves lateral diffusion of the VSG in the plane of the membrane to the fixed position of the GPI-PLC.