Using all-atom explicit solvent replica exchange molecular dynamics simulations with solute tempering, we study the effect of methionine oxidation on Aβ10-40 peptide binding to the zwitterionic DMPC bilayer. By comparing oxidized and reduced peptides, we identified changes in the binding mechanism caused by this modification. First, Met35 oxidation unravels C-terminal helix in the bound peptides. Second, oxidation destabilizes intrapeptide interactions and expands bound peptides. We explain these outcomes by the loss of amphiphilic character of the C-terminal helix due to oxidation. Third, oxidation "polarizes" Aβ binding to the DMPC bilayer by strengthening the interactions of the C-terminus with lipids while largely releasing the rest of the peptide from bilayer. Fourth, in contrast to the wild-type peptide, oxidized Aβ induces significantly smaller bilayer thinning and drop in lipid density within the binding footprint. These observations are the consequence of mixing oxidized peptide amino acids with lipids promoted by enhanced Aβ conformational fluctuations. Fifth, methionine oxidation reduces the affinity of Aβ binding to the DMPC bilayer by disrupting favorable intrapeptide interactions upon binding, which offset the gains from better hydration. Reduced binding affinity of the oxidized Aβ may represent the molecular basis for its reduced cytotoxicity.