Small heat shock proteins (sHsps) are molecular chaperones that efficiently bind non-native proteins. All members of this family investigated so far are oligomeric complexes. For Hsp26, an sHsp from the cytosol of Saccharomyces cerevisiae, it has been shown that at elevated temperatures the 24-subunit complex dissociates into dimers. This dissociation seems to be required for the efficient interaction with unfolding proteins that results in the formation of large, regular complexes comprising Hsp26 and the non-native proteins. To gain insight into the molecular mechanism of this chaperone, we analyzed the dynamics and stability of the two oligomeric forms of Hsp 26 (i.e. the 24-mer and the dimer) in comparison to a construct lacking the N-terminal domain (Hsp26DeltaN). Furthermore, we determined the stabilities of complexes between Hsp26 and non-native proteins. We show that the temperature-induced dissociation of Hsp26 into dimers is a completely reversible process that involves only a small change in energy. The unfolding of the dissociated Hsp26 dimer or Hsp26DeltaN, which is a dimer, requires a much higher energy. Because Hsp26DeltaN was inactive as a chaperone, these results imply that the N-terminal domain is of critical importance for both the association of Hsp26 with non-native proteins and the formation of large oligomeric complexes. Interestingly, complexes of Hsp26 with non-native proteins are significantly stabilized against dissociation compared with Hsp26 complexes. Taken together, our findings suggest that the quaternary structure of Hsp26 is determined by two elements, (i) weak, regulatory interactions required to form the shell of 24 subunits and (ii) a strong and stable dimerization of the C-terminal domain.