The small heat shock proteins (sHSPs) are ubiquitous stress proteins proposed to act as molecular chaperones to prevent irreversible protein denaturation. We characterized the chaperone activity of Synechocystis HSP17 and found that it has not only protein-protective activity, but also a previously unrecognized ability to stabilize lipid membranes. Like other sHSPs, recombinant Synechocystis HSP17 formed stable complexes with denatured malate dehydrogenase and served as a reservoir for the unfolded substrate, transferring it to the DnaK/DnaJ/GrpE and GroEL/ES chaperone network for subsequent refolding. Large unilamellar vesicles made of synthetic and cyanobacterial lipids were found to modulate this refolding process. Investigation of HSP17-lipid interactions revealed a preference for the liquid crystalline phase and resulted in an elevated physical order in model lipid membranes. Direct evidence for the participation of HSP17 in the control of thylakoid membrane physical state in vivo was gained by examining an hsp17(-) deletion mutant compared with the isogenic wild-type hsp17(+) revertant Synechocystis cells. We suggest that, together with GroEL, HSP17 behaves as an amphitropic protein and plays a dual role. Depending on its membrane or cytosolic location, it may function as a "membrane stabilizing factor" as well as a member of a multichaperone protein-folding network. Membrane association of sHSPs could antagonize the heat-induced hyperfluidization of specific membrane domains and thereby serve to preserve structural and functional integrity of biomembranes.