Antimicrobial peptides are small, cationic proteins that can induce lysis of bacterial cells through interaction with their membranes. Different mechanisms for cell lysis have been proposed, but these models tend to neglect the role of the chemical composition of the membrane, which differs between bacterial species and can be heterogeneous even within a single cell. Moreover, the cell envelope of Gram-negative bacteria such as E. coli contains two membranes with differing compositions. To this end, we report the first molecular dynamics simulation study of the interaction of the antimicrobial peptide, polymyxin B1 with complex models of both the inner and outer membranes of E. coli. The results of >16 microseconds of simulation predict that polymyxin B1 is likely to interact with the membranes via distinct mechanisms. The lipopeptides aggregate in the lipopolysaccharide headgroup region of the outer membrane with limited tendency for insertion within the lipid A tails. In contrast, the lipopeptides readily insert into the inner membrane core, and the concomitant increased hydration may be responsible for bilayer destabilization and antimicrobial function. Given the urgent need to develop novel, potent antibiotics, the results presented here reveal key mechanistic details that may be exploited for future rational drug development.