The amyloid hypothesis of Alzheimer's toxicity has undergone a resurgence with increasing evidence that it is not amyloid fibrils but a smaller oligomeric species that produces the deleterious results. In this paper we address the mechanism of this toxicity. Only oligomers increase the conductance of lipid bilayers and patch-clamped mammalian cells, producing almost identical current-voltage curves in both preparations. Oligomers increase the conductance of the bare bilayer, the cation conductance induced by nonactin, and the anion conductance induced by tetraphenyl borate. Negative charge reduces the sensitivity of the membrane to amyloid, but cholesterol has little effect. In contrast, the area compressibility of the lipid has a very large effect. Membranes with a large area compressibility modulus are almost insensitive to amyloid oligomers, but membranes formed from soft, highly compressible lipids are highly susceptible to amyloid oligomer-induced conductance changes. Furthermore, membranes formed using the solvent decane (instead of squalane) are completely insensitive to the presence of oligomers. One simple explanation for these effects on bilayer conductance is that amyloid oligomers increase the area per molecule of the membrane-forming lipids, thus thinning the membrane, lowering the dielectric barrier, and increasing the conductance of any mechanism sensitive to the dielectric barrier.