LolA, a periplasmic chaperone, binds to outer membrane-specific lipoproteins released from the inner membrane through the action of an ATP-binding cassette transporter, LolCDE and then transfers them to the outer membrane receptor LolB, thereby mediating the inner to outer membrane transport of lipoproteins. The crystal structure of free LolA revealed that it has an internal hydrophobic cavity, which is surrounded by hydrophobic residues and closed by a lid comprising alpha-helices. The hydrophobic cavity most likely represents the binding site for the lipid moiety of a lipoprotein. It is speculated that the lid undergoes opening and closing upon the binding and transfer of lipoproteins, respectively. To determine the functions of the hydrophobic cavity and lid in detail, 14 residues involved in the formation of these structures were subjected to random mutagenesis. Among the obtained 21 LolA derivatives that did not support growth, 14 were active as to the binding of lipoproteins but defective in the transfer of lipoproteins to LolB, causing the periplasmic accumulation of a lipoprotein as a complex with a LolA derivative. A LolA derivative, I93G, bound lipoproteins faster than wild-type LolA did, whereas it did not transfer associated lipoproteins to LolB. When I93G and wild type LolA co-existed, lipoproteins were bound only to I93G; which therefore exhibited a dominant negative property. Another derivative, L59R, was also defective in the transfer of lipoproteins to LolB but did not exhibit a dominant negative property. Taken together, these results indicate that both the hydrophobic cavity and the lid are critically important for not only the binding of lipoproteins but also their transfer.