The small heat shock protein (smHSP) and alpha-crystallin genes encode a family of 12-43-kDa proteins which assemble into large multimeric structures, function as chaperones by preventing protein aggregation, and contain a conserved region termed the alpha-crystallin domain. Here we report on the structural and functional characterization of Caenorhabditis elegans HSP16-2, a 16-kDa smHSP produced only under stress conditions. A combination of sedimentation velocity, size exclusion chromatography, and cross-linking analyses on wild-type HSP16-2 and five derivatives demonstrate that the N-terminal domain but not most of the the C-terminal extension which follows the alpha-crystallin domain is essential for the oligomerization of the smHSP into high molecular weight complexes. The N terminus of HSP16-2 is found to be buried within complexes which can accommodate at least an additional 4-kDa of heterologous sequence per subunit. Studies on the interaction of HSP16-2 with fluorescently-labeled and radiolabeled actin and tubulin reveal that this smHSP possesses a high affinity for unfolded intermediates which form early on the aggregation pathway, but has no apparent substrate specificity. Furthermore, both wild-type and C-terminally-truncated HSP16-2 can function as molecular chaperones by suppressing the thermally-induced aggregation of citrate synthase. Taken together, our data on HSP16-2 and a unique 12.6-kDa smHSP we have recently characterized demonstrate that multimerization is a prerequisite for the interaction of smHSPs with unfolded protein as well as for chaperone activity.