Cationic antimicrobial peptides (AMPs) are toxic to microbes, such as bacteria and fungi, and have been increasingly studied as an alternative to traditional antibiotics, in part because AMPs are bactericidal with a minimum risk of developing bacterial resistance. Indolicidin (IL) is an AMP derived from bovine neutrophils that is unique due to its high prevalence of tryptophan and proline amino acids and its disordered structure. In addition to its antimicrobial activity, IL has exhibited toxicity toward mammalian cells, resulting in hemolysis. Although the precise physicochemical mechanism of IL cytotoxicity is unknown, its interactions with lipid bilayers are the primary focus of investigation. We conducted all-atom replica-exchange molecular dynamics simulations with solute tempering (REST) to rigorously explore the interactions between IL and a dimyristoylphosphatidylcholine (DMPC) bilayer and establish the atomistic basis of IL binding. We also performed REST simulations of IL in water to probe the conformational changes in IL between water and bilayer environments. Our simulations demonstrate that IL, which predominantly adopts random coil conformations in both environments, loses turn structure and tertiary contacts, extending upon binding to the bilayer. IL interactions with the bilayer are stabilized by its positively charged C-terminus, which features two arginines that anchor to the bilayer and coordinate lipid phosphate groups. When IL binds to the bilayer, it largely resides in the interfacial region and its adsorption to the bilayer results in peptide desolvation. IL depletes the lipid density in its binding footprint, disrupting fatty acid tails of nearby lipids. These results are highlighted by a bilayer-aware clustering analysis, which shows that IL adopts dominant inserted and partially surface-bound states. We demonstrate that our simulation results are in good agreement with the available experimental data. Consequently, our simulations provide a complementary view of binding of IL to lipid bilayers that further elucidates its molecular mechanism.