The HIV gp41 fusion domain plays a critical role in membrane fusion during viral entry. A thorough understanding of the relationship between the structure and activity of the fusion domain in different lipid environments helps to formulate mechanistic models on how it might function in mediating membrane fusion. The secondary structure of the fusion domain in small liposomes composed of different lipid mixtures was investigated by circular dichroism spectroscopy. In membranes containing less than 30 mol% cholesterol the fusion domain formed an α-helix and in membranes containing equal to or more than 30 mol% cholesterol the fusion domain formed β-sheet secondary structure. EPR spectra of spin-labeled fusion domains also indicated different conformations in membranes with and without cholesterol. Power saturation EPR data were further used to determine the orientation and depth of α-helical fusion domains in lipid bilayers. Fusion and membrane perturbation activities of the gp41 fusion domain were measured by lipid mixing and contents leakage. The fusion domain fused membranes in both its helical and β-sheet forms. High cholesterol, which induced β-sheet, promoted fusion, but acidic lipids, which promoted relatively deep membrane insertion as an α-helix, also induced fusion. The results indicate that the structure of the HIV gp41 fusion domain is plastic and depends critically on the lipid environment. Provided their membrane insertion is deep, α-helical and β-sheet conformations contribute to membrane fusion.