Cortisone is an injected anti-inflammatory drug that can cause painful side effects known as “steroid flares” which are caused by cortisone crystallizing at the injection site. We used molecular dynamics simulations and X-ray diffraction to study the interaction of cortisone with model lipid membranes made of 1-palmitoyl-2-oleoyl-sn-glycero-3-phosphocholine (POPC) at drug concentrations from 0 mol% to 50 mol%. Cortisone was found to partition in the lipid bilayer and locate in the hydrophilic to hydrophobic interface of the membranes. Cortisone strongly affects the integrity of the membrane, as quantified by a decreased membrane thickness, increased area per lipid and decreased lipid tail order parameters. At cortisone concentrations of more than 20 mol%, signals from crystallized cortisone were observed. These crystallites are embedded in the bilayers and orient with the membranes. While the cortisone molecules align parallel to the bilayers at low concentrations, they start to penetrate the hydrophobic core at higher concentrations. Trans-membrane crystallites start to nucleate when the membrane thickness has decreased such that cortisone molecules in the different leaflets can find partners from the opposite leaflet resulting in a non-zero density of cortisone molecules in the bilayer center. We suggest that the lipid bilayer provides a site for cortisone crystallization.