In type-2 diabetes (T2D), islet amyloid polypeptide (IAPP) self-associates into toxic assemblies causing islet β-cell death. Therefore, preventing IAPP toxicity is a promising therapeutic strategy for T2D. The molecular tweezer CLR01 is a supramolecular tool for selective complexation of K residues in (poly)peptides. Surprisingly, it inhibits IAPP aggregation at substoichiometric concentrations even though IAPP has only one K residue at position 1, whereas efficient inhibition of IAPP toxicity requires excess CLR01. The basis for this peculiar behavior is not clear. Here, a combination of biochemical, biophysical, spectroscopic, and computational methods reveals a detailed mechanistic picture of the unique dual inhibition mechanism for CLR01. At low concentrations, CLR01 binds to K1, presumably nucleating nonamyloidogenic, yet toxic, structures, whereas excess CLR01 binds also to R11, leading to nontoxic structures. Encouragingly, the CLR01 concentrations needed for inhibition of IAPP toxicity are safe in vivo, supporting its development toward disease-modifying therapy for T2D.