We have studied interfacial compressibility and lateral organization in monolayer configurations of total (squalene containing) and polar (squalene-devoid) lipid extracts of Halobacterium salinarum NRC-1, an extremely halophilic archaeon. Pressure-area isotherms derived from Langmuir experiments reveal that packing characteristics and elastic compressibility are strongly influenced by the presence of squalene in the total lipid extract. In conjunction with control experiments using mixtures of DPhPC and squalene, our results establish that the presence of squalene significantly extends elastic area compressibility of total lipid extracts, suggesting it has a role in facilitating tighter packing of archaeal lipid mixtures. Moreover, we find that squalene also influences spatial organization in archaeal membranes. Epifluorescence and atomic force microscopy characterization of Langmuir monolayers transferred onto solid hydrophilic substrates reveal an unusual domain morphology. Individual domains of microscopic dimensions (as well as their extended networks) exhibiting a peculiar bowl-like topography are evident in atomic force microscopy images. The tall rims outlining individual domains indicate that squalene accumulates at the domain periphery in a manner similar to the accumulation of cholesterol at domain boundaries in their mixtures with phospholipids. Taken together, the results presented here support the notion that squalene plays a role in modulating molecular packing and lateral organization (i.e., domain formation) in the membranes of archaea analogous to that of cholesterol in eukaryotic membranes.