Escherichia coli K-12 carries a gene for a protein denoted ClyA or SheA that can mediate a cytolytic phenotype. The ClyA protein is not expressed at detectable levels in most strains of E. coli, but overproduction suitable for purification was accomplished by cloning the structural gene in an hns mutant strain. Highly purified ClyA protein was cytotoxic to macrophage cells in culture and caused detachment and lysis of the mammalian cells. Results from osmotic protection assays were consistent with the suggestion that the protein formed pores with a diameter of up to 3 nm. Using Acholeplasma laidlawii cells and multilamellar liposomes, we studied the effect of ClyA on membranes with varying compositions and in the presence of different ions. ClyA induced cytolytic release of the fluorescent tracer from carboxyfluorescein-loaded liposomes, and the release was stimulated if cholesterol was present in the membranes whereas addition of calcium had no effect. Pretreatment of the ClyA protein with cholesterol inhibited the pore formation, suggesting that ClyA could bind to cholesterol. Efficient coprecipitation of ClyA with either cholesterol or 1,2,3-trioctadecanoylglycerol in aqueous solutions showed that ClyA directly interacted with the hydrophobic molecular aggregates. We tested the possible functional importance of selected ClyA protein regions by site-directed mutagenesis. Defined mutants of ClyA were obtained with alterations in postulated transmembrane structures in the central part and in a postulated membrane-targeting domain in the C-terminal part. Our results were consistent with the suggestion that particular amphiphilic segments are required for ClyA activity. We propose that these domains are necessary for ClyA to form pores.