The haem‐containing mono‐oxygenase cytochrome P450 3A4 (CYP3A4) and its redox partner NADPH‐dependent cytochrome P450 oxidoreductase (CPR) are among the most important enzymes in human liver for metabolizing drugs and xenobiotic compounds. They are membrane‐bound in the endoplasmic reticulum (ER). How ER colocalization and the complex ER phospholipid composition influence enzyme activity are not well understood. CPR and CYP3A4 were incorporated into phospholipid bilayer nanodiscs, both singly, and together in a 1 : 1 ratio, to investigate the significance of membrane insertion and the influence of varying membrane composition on steady‐state reaction kinetics. Reaction kinetics were analysed using a fluorimetric assay with 7‐benzyloxyquinoline as substrate for CYP3A4. Full activity of the mono‐oxygenase system, with electron transfer from NADPH via CPR, could only be reconstituted when CPR and CYP3A4 were colocalized within the same nanodiscs. No activity was observed when CPR and CYP3A4 were each incorporated separately into nanodiscs then mixed together, or when soluble forms of CPR were mixed with preassembled CYP3A4‐nanodiscs. Membrane integration and colocalization are therefore essential for electron transfer. Liver microsomal lipid had an enhancing effect compared with phosphatidylcholine on the activity of CPR alone in nanodiscs, and a greater enhancing effect on the activity of CPR‐CYP3A4 nanodisc complexes, which was not matched by a phospholipid mixture designed to mimic the ER composition. Furthermore, liver lipid enhanced redox coupling within the system. Thus, natural ER lipids possess properties or include components important for enhanced catalysis by CPR‐CYP3A4 nanodisc complexes. Our findings demonstrate the importance of using natural lipid preparations for the detailed analysis of membrane protein activity.