A leading hypothesis for the decimation of insulin-producing β-cells in type 2 diabetes attributes the cause to islet amyloid polypeptide (IAPP) for its deleterious effects on the cell membranes. This idea has produced extensive investigations on human IAPP (hIAPP) and its interactions with lipid bilayers. However, it is still difficult to correlate the peptide-lipid interactions with its effects on islet cells in culture. The hIAPP fibrils have been shown to interact with lipids and damage lipid bilayers, but appear to have no effect on islet cells in culture. Thus, a modified amyloid hypothesis assumes that the toxicity is caused by hIAPP oligomers, which are not preamyloid fibrils or protofibrils. However, so far such oligomers have not been isolated or identified. The hIAPP monomers also bind to lipid bilayers, but the mode of interaction is not clear. Here, we performed two types of experiments that, to our knowledge, have not been done before. We used x-ray diffraction, in conjunction with circular dichroism measurement, to reveal the location of the peptide bound to a lipid bilayer. We also investigated the effects of hIAPP on giant unilamellar vesicles at various peptide concentrations. We obtained the following qualitative results. Monomeric hIAPP binds within the headgroup region and expands the membrane area of a lipid bilayer. At low concentrations, such binding causes no leakage or damage to the lipid bilayer. At high concentrations, the bound peptides transform to β-aggregates. The aggregates exit the headgroup region and bind to the surface of lipid bilayers. The damage by the surface bound β-aggregates depends on the aggregation size. The initial aggregation extracts lipid molecules, which probably causes ion permeation, but no molecular leakage. However, the initial β-aggregates serve as the seed for larger fibrils, in the manner of the Jarrett-Lansbury seeded-polymerization model, that eventually disintegrate lipid bilayers by electrostatic and hydrophobic interactions.