One of the key steps in understanding human disease arising from gram-positive bacteria lies in the mechanisms of the cholesterol-dependent cytolysins (CDCs). Pneumolysin (PLY), a CDC from Streptococcus pneumoniae, is of special importance due to the severe impacts of pneumococcal infections on mortality and morbidity worldwide. We have overexpressed, purified, and characterized PLY in its fully functional complex form with the enzyme bound to its receptor activator on target cells, cholesterol. The circular dichroism studies of PLY in solution with an excess of cholesterol show a change in the far UV spectrum consistent with a decrease in the beta-sheet and an increase in the random coil structures of the enzyme. Pore formation in membranes leading to cell lysis is the functional target for this cytolysin. The sedimentation velocity and equilibrium analyses of the cholesterol-bound enzyme show hydrodynamic properties different from those of the cholesterol-free form. The soluble form of the cholesterol-free enzyme exists in solution as a mixture of monomers and dimers, whereas the cholesterol-bound form exists only as a monomer. A mechanism of formation of PLY pores in the lipid bilayer of the target cells is discussed.