The 40 and 42 residue amyloid-beta (Abeta) peptides are major components of the proteinaceous plaques prevalent in the Alzheimer's disease-afflicted brain and have been shown to have an important role in instigating neuronal degeneration. Whereas it was previously thought that Abeta becomes cytotoxic upon forming large fibrillar aggregates, recent studies suggest that soluble intermediate-sized oligomeric species cause cell death through membrane permeabilization. The present study examines the interactions between Abeta40 and lipid membranes using liposomes as a model system to determine how changes in membrane composition influence the conversion of Abeta into these toxic species. Abeta40 membrane binding was monitored using fluorescence-based assays with a tryptophan-substituted peptide (Abeta40 [Y10W]). We extend previous observations that Abeta40 interacts preferentially with negatively charged membranes, and show that binding of nonfibrillar, low molecular mass oligomers of Abeta40 to anionic, but not neutral, membranes involves insertion of the peptide into the bilayer, as well as sequential conformational changes corresponding to the degree of oligomerization induced. Significantly, while anionic membranes in the gel, liquid crystalline, and liquid ordered phases induce these conformational changes equally, membrane permeabilization is reduced dramatically as the fluidity of the membrane is decreased. These findings demonstrate that binding alone is not sufficient for membrane permeabilization, and that the latter is also highly dependent on the fluidity and phase of the membrane. We conclude that binding and pore formation are two distinct steps. The differences in Abeta behavior induced by membrane composition may have significant implications on the development and progression of AD as neuronal membrane composition is altered with age.