Despite its central role in the protein folding process, the specific mechanism(s) behind beta-sheet formation has yet to be determined. For example, whether the nucleation of beta-sheets, often containing strands separated in sequence by many residues, is local or not remains hotly debated. Here, we investigate the initial nucleation step of beta-sheet formation by performing an analysis of the smallest beta-sheets in a non-redundant dataset on the grounds that the smallest sheets, having undergone little growth after nucleation, will be enriched for nucleating characteristics. We find that the residue propensities are similar for small and large beta-sheets as are their interstrand pairing preferences, suggesting that nucleation is not primarily driven by specific residues or interacting pairs. Instead, an examination of the structural environments of the two-stranded sheets shows that virtually all of them are contained in single, compact structural modules, or when multiple modules are present, one or both of the chain termini are involved. We, therefore, find that beta-nucleation is a local phenomenon resulting either from sequential or topological proximity. We propose that beta-nucleation is a result of two opposite factors; that is, the relative rigidity of an associated folding module that holds two stretches of coil close together in topology coupled with sufficient chain flexibility that enables the stretches of coil to bring their backbones in close proximity. Our findings lend support to the hydrophobic zipper model of protein folding (Dill, K. A., Fiebig, K. M., and Chan, H. S. (1993) Proc. Natl. Acad. Sci. U.S.A. 90, 1942-1946). Implications for protein folding are discussed.