Streptolysin O is a four-domain protein toxin that permeabilizes animal cell membranes. The toxin first binds as a monomer to membrane cholesterol and subsequently assembles into oligomeric transmembrane pores. Binding is mediated by a C-terminally located tryptophan-rich motif. In a previous study, conformational effects of membrane binding were characterized by introducing single mutant cysteine residues that were then thiol-specifically derivatized with the environmentally sensitive fluorophoracrylodan. Membrane binding of the labeled proteins was accompanied by spectral shifts of the probe fluorescence, suggesting that the toxin molecule had undergone a conformational change. Here we provide evidence that this change corresponds to an allosteric transition of the toxin monomer that is required for the subsequent oligomerization and pore formation. The conformational change is reversible with reversal of binding, and it is related to temperature in a fashion that closely parallels the temperature-dependency of oligomerization. Furthermore, we describe a point mutation (N402E) that, while compatible with membrane binding, abrogates the accompanying conformational change. At the same time, the N402E mutation also abolishes oligomerization. These findings corroborate the contention that the target membrane acts as an allosteric effector to activate the oligomerizing and pore-forming capability of streptolysin O.