The steroid binding mechanism of a DNA aptamer was studied using isothermal titration calorimetry (ITC), NMR spectroscopy, quasi-elastic light scattering (QELS), and small-angle X-ray spectroscopy (SAXS). Binding affinity determination of a series of steroid-binding aptamers derived from a parent cocaine-binding aptamer demonstrates that substituting a GA base pair with a GC base pair governs the switch in binding specificity from cocaine to the steroid deoxycholic acid (DCA). Binding of DCA to all aptamers is an enthalpically driven process with an unfavorable binding entropy. We engineered into the steroid-binding aptamer a ligand-induced folding mechanism by shortening the terminal stem by two base pairs. NMR methods were used to demonstrate that there is a transition from a state where base pairs are formed in one stem of the free aptamer, to where three stems are formed in the DCA-bound aptamer. The ability to generate a ligand-induced folding mechanism into a DNA aptamer architecture based on the three-way junction of the cocaine-binding aptamer opens the door to obtaining a series of aptamers all with ligand-induced folding mechanisms but triggered by different ligands. Hydrodynamic data from diffusion NMR spectroscopy, QELS, and SAXS show that for the aptamer with the full-length terminal stem there is a small amount of structure compaction with DCA binding. For ligand binding by the short terminal stem aptamer, we propose a binding mechanism where secondary structure forms upon DCA binding starting from a free structure where the aptamer exists in a compact form.