Prokaryotic mechanosensitive (MS) channels open by sensing the physical state of the membrane. As such, lipid-protein interactions represent the defining molecular process underlying mechanotransduction. Here, we describe cryo-electron microscopy (cryo-EM) structures of the E. coli small-conductance mechanosensitive channel (MscS) in nanodiscs (ND). They reveal a novel membrane-anchoring fold that plays a significant role in channel activation and establish a new location for the lipid bilayer, shifted ~14 Å from previous consensus placements. Two types of lipid densities are explicitly observed. A phospholipid that ‘hooks’ the top of each TM2-TM3 hairpin and likely plays a role in force sensing, and a bundle of acyl chains occluding the permeation path above the L105 cuff. These observations reshape our understanding of force-from-lipids gating in MscS and highlight the key role of allosteric interactions between TM segments and phospholipids bound to key dynamic components of the channel.