Sphingomyelin (SM) is abundant in the outer leaflet of the cell plasma membrane, with the ability to concentrate in so-called lipid rafts. These specialized cholesterol-rich microdomains not only are associated with many physiological processes but also are exploited as cell entry points by pathogens and protein toxins. SM binding is thus a widespread and important biochemical function, and here we reveal the molecular basis of SM recognition by the membrane-binding eukaryotic cytolysin equinatoxin II (EqtII). The presence of SM in membranes drastically improves the binding and permeabilizing activity of EqtII. Direct binding assays showed that EqtII specifically binds SM, but not other lipids and, curiously, not even phosphatidylcholine, which presents the same phosphorylcholine headgroup. Analysis of the EqtII interfacial binding site predicts that electrostatic interactions do not play an important role in the membrane interaction and that the two most important residues for sphingomyelin recognition are Trp(112) and Tyr(113) exposed on a large loop. Experiments using site-directed mutagenesis, surface plasmon resonance, lipid monolayer, and liposome permeabilization assays clearly showed that the discrimination between sphingomyelin and phosphatidylcholine occurs in the region directly below the phosphorylcholine headgroup. Because the characteristic features of SM chemistry lie in this subinterfacial region, the recognition mechanism may be generic for all SM-specific proteins.