Protein-membrane interactions underlie numerous biological processes including folding of ion channels and signal transduction across lipid membranes. A detailed understanding of protein–lipid interactions is critical for designing membrane-active peptides as potential antibiotics, as well. Using gramicidin A (gA) as a model system, we investigated the effects of lysine methylation on peptide folding into transmembrane channels. The results are discussed in terms of the peptides' binding affinity to, translocation across, and structure formation in lipid membranes. The results show that gA mutants with Nɛ-trimethylated d-lysines (dMe3K) are capable of folding into wild type-like channels that are selective for monovalent cations. Surprisingly, Nɛ-trimethylation in general reduces the peptide's binding affinity to lipid membranes despite the increased hydrophobicity. Further investigation reveals the critical contribution of the hydrogen bonding potential of lysine side chains to peptide-membrane association, which has previously been underappreciated. Importantly, methylation does give improved therapeutic indices for certain combinations of gA variant and bacterium, indicating that methylation can be an effective strategy to fine tune the performance of peptide antibiotics. © 2013 Wiley Periodicals, Inc. Biopolymers (Pept Sci) 100: 656–661, 2013.