Proteins belonging to the CAP superfamily are present in all kingdoms of life and have been implicated in different physiological processes. Their molecular mode of action, however, is poorly understood. Saccharomyces cerevisiae expresses three members of this superfamily, pathogen-related yeast (Pry)1, -2, and -3. We have recently shown that Pry function is required for the secretion of cholesteryl acetate and that Pry proteins bind cholesterol and cholesteryl acetate, suggesting that CAP superfamily members may generally act to bind sterols or related small hydrophobic compounds. Here, we analyzed the mode of sterol binding by Pry1. Computational modeling indicates that ligand binding could occur through displacement of a relatively poorly conserved flexible loop, which in some CAP family members displays homology to the caveolin-binding motif. Point mutations within this motif abrogated export of cholesteryl acetate but did not affect binding of cholesterol. Mutations of residues located outside the caveolin-binding motif, or mutations in highly conserved putative catalytic residues had no effect on export of cholesteryl acetate or on lipid binding. These results indicate that the caveolin-binding motif of Pry1, and possibly of other CAP family members, is crucial for selective lipid binding and that lipid binding may occur through displacement of the loop containing this motif.