My talk addresses two questions regarding how the lipid bilayer environment in cells mediates folding and function of membrane proteins: 1) Is the lipid bilayer a good solvent for the denatured states of membrane proteins? 2) What is the role of lipid solvation in the stability and cooperativity of membrane proteins? We have developed an array of “steric trapping”-based methods to delineate the thermodynamic stability, conformational features of the denatured states, and residue interaction network of membrane proteins. Using the intramembrane protease GlpG of E. coli as a model, we find that the bilayer environment 1) induces contraction but not collapse of the denatured state of GlpG, 2) enhances the stability of the protein by facilitating the residue burial in the protein interior, and 3) strengthens the residue-interaction network such that the whole residue-packed regions can act as a single cooperative unit. I will discuss how these properties shed light and cast shadows on the folding, quality control, and function of membrane proteins.