We investigated the properties of several peptides with sequences related to LWYIK, a segment found in the gp41 protein of HIV and believed to play a role in sequestering this protein to a cholesterol-rich domain in the membrane. This segment fulfills the requirements to be classified as a CRAC motif that has been suggested to predict those proteins that will partition into cholesterol-rich regions of the membrane. All of the peptides were studied with the terminal amino and carboxyl groups blocked, i.e., as N-acetyl-peptide-amides. Effects of cholesterol on the intensity of W emission generally parallel DSC evidence of sequestration of cholesterol. Modeling studies indicate that all of these peptides tend to partition with their mass center at the membrane interface at the level of the hydroxyl of cholesterol. Interaction with cholesterol is dual: van der Waals interactions between mainly hydrophobic surfaces and electrostatic stabilization of the cholesterol OH group. Thus, both experiments and modeling studies indicate that the preference of CRAC motifs for cholesterol-rich domains might be related to a membrane interfacial preference of the motif, to a capacity to wrap and block the cholesterol polar OH group by H-bond interactions, and to a capacity for peptide aromatic side chains to stack with cholesterol. These results were supported by studies of single mutations in the gp41 protein of HIV-1, in which L(679) is replaced with I. Despite the similarity of the properties of these amino acid residues, this single substitution resulted in a marked attenuation of the ability of JC53-BL HeLa-based HIV-1 indicator cells to form syncytia.