Lipids extracted from rabbit skin block the hemolytic capacity of SO and also suppress the neutralizing antibody response to this streptococcal extracellular antigen in rabbith immunized intravenosly. The modification in antibody response is specific for SO; the antibody responses to streptococcal DNase B and to streptococcal NADase are not affected. Cholesterol, a lipid present in abundance in skin, has a similar specific effect on the antigenicity of SO and may be the component responsible for the demonstrated effects of these lipid extracts of skin. In vitro experiments indicate that lipid extracts of rabbit skin have a greater capacity to block the hemolytic capacity of SO than do lipid extracts of rabbit heart, kidney, lung, liver, or spleen. These data support the view that the feeble ASO response observed in patients with streptococcal pyoderma is a result of the abundance of a local lipid inhibitor, such as cholesterol, in the skin. They may also bear on the pathogenesis of rheumatic fever, a complication which apparently does not occur following group A streptococcal pyoderma. Two possible explanations for this remarkable epidemiologic observation, both related to the presence of a local inhibitor, are considered: (a) suppression of the ASO response, the magnitude of which has been correlated with the risk of developing rheumatic fever after streptococcal infection of the throat, and (b) inhibition of the toxicity of SO, which has been shown to have a direct toxic effect on the mammalian heart and on isolated beating myocytes.