Sterol carrier protein-2 (SCP2) is a small, 123 amino acid, protein postulated to play a role in intracellular transport and metabolism of lipids such as cholesterol, phospholipids, and branched chain fatty acids. While it is thought that interaction of SCP2 with membranes is necessary for lipid transfer, evidence for this possibility and identification of a membrane interaction domain within SCP2 has remained elusive. As shown herein with circular dichroism and a direct binding assay, SCP2 bound to small unilamellar vesicle (SUV) membranes to undergo significant alteration in secondary structure. The SCP2 amphipathic N-terminal 32 amino acids, comprised of two alpha-helical segments, were postulated to represent a putative phospholipid interaction site. This hypothesis was tested with a series of SCP2 N-terminal peptides, circular dichroism, and direct binding studies. The SCP2 N-terminal peptide (1-32)SCP2, primarily random coil in aqueous buffer, adopted alpha-helical structure upon interaction with membranes. The induction of alpha-helical structure in the peptide was maximal when the membranes contained a high mole percent of negatively charged phospholipid and of cholesterol. While deletion of the second alpha-helical segment within this peptide had no effect on formation of the first alpha-helix, it significantly weakened the peptide interaction with membranes. Substitution of Leu(20) with Glu(20) in the N-terminal peptide disrupted the alpha-helix structure and greatly weakened the peptide interaction with membranes. Finally, deletion of the first nine nonhelical amino acids had no effect either on formation of alpha-helix or on peptide binding to membranes. N-Terminal peptide (1-32)SCP2 competed with SCP2 for binding to SUV. These data were consistent with the N-terminus of SCP2 providing a membrane interaction domain that preferentially bound to membranes rich in anionic phospholipid and cholesterol.