Intramembrane proteases, which cleave transmembrane (TM) helices, participate in numerous biological processes encompassing all branches of life. Several crystallographic structures of Escherichia coli GlpG rhomboid protease have been determined. In order to understand GlpG dynamics and lipid interactions in a native-like environment, we have examined the molecular dynamics of wild-type and mutant GlpG in different membrane environments. The irregular shape and small hydrophobic thickness of the protein cause significant bilayer deformations that may be important for substrate entry into the active site. Hydrogen-bond interactions with lipids are paramount in protein orientation and dynamics. Mutations in the unusual L1 loop cause changes in protein dynamics and protein orientation that are relayed to the His-Ser catalytic dyad. Similarly, mutations in TM5 change the dynamics and structure of the L1 loop. These results imply that the L1 loop has an important regulatory role in proteolysis.