Beta sheet peptides (e.g., amyloid beta) are known to form ion channels in lipid bilayers possibly through aggregation, though the channel structure is not clear. We have recently reported that a short beta sheet peptide, (xSxG)(6), forms porin-like voltage-gated channels in lipid bilayers [Thundimadathil et al. (2005) Biochem. Biophys. Res. Commun. 330, 585-590]. To account for the porin-like activity, oligomerization of the peptide into a beta barrel-like structure was proposed. In this work, peptide aggregation in aqueous and membrane environments and a detailed study of channel properties were performed to gain insight into the mechanism of channel formation. The complex nature of the channel was revealed by kinetic analysis and the occurrence of interconverting multiple conductance states. Ion channels were inhibited by Congo red, suggesting that the peptide aggregates are the active channel species. Peptide aggregation and fibril formation in water were confirmed by electron microscopy (EM) and Congo red binding studies. Furthermore, oligomeric structures in association with lipid bilayers were detected. Circular dichroism of peptide-incorporated liposomes and peptide-lipid binding studies using EM suggest a lipid-induced beta sheet aggregation. Gel electrophoresis of peptide-incorporated liposomes showed dimeric and multimeric structures. Taken together, this work indicates insertion of (xSxG)(6) as oligomers into the lipid bilayer, followed by rearrangement into a beta barrel-like pore structure. A large peptide pore comprising several individual beta sheets or smaller beta sheet aggregates is expected to have a complex behavior in membranes. A dyad repeat sequence and the presence of glycine, serine, and hydrophobic residues in a repeated pattern in this peptide may be providing a favorable condition for the formation of a beta barrel-like structure in lipid bilayers.