We report studies of the subcellular localization of the ClyA cytotoxic protein and of mutations causing defective translocation to the periplasm in Escherichia coli. The ability of ClyA to translocate to the periplasm was abolished in deletion mutants lacking the last 23 or 11 amino acid residues of the C-terminal region. A naturally occurring ClyA variant lacking four residues (183 to 186) in a hydrophobic subdomain was retained mainly in the cytosolic fraction. These mutant proteins displayed an inhibiting effect on the expression of the hemolytic phenotype of wild-type ClyA. Studies in vitro with purified mutant ClyA proteins revealed that they were defective in formation of pore assemblies and that their activity in hemolysis assays and in single-channel conductance tests was at least 10-fold lower than that of the wild-type ClyA. Tests with combinations of the purified proteins indicated that mutant and wild-type ClyA interacted and that formation of heteromeric assemblies affected the pore-forming activity of the wild-type protein. The observed protein-protein interactions were consistent with, and provided a molecular explanation for, the dominant negative feature of the mutant ClyA variants.