(Bt) is a valuable environment-friendly biopesticide, which occupies 90% of the world biopesticide market. Its insecticidal properties are attributed to the presence of δ-endotoxins which are synthesized during the sporulation phase of the bacterium. δ-endotoxin or crystal toxin is a multi-domain protein molecule comprising of three distinct domains. Domain I is made of seven α-helices, domain II comprises three antiparallel β sheets, which are folded into loops and domain III is made of a β sandwich of two antiparallel β strands. Molecular studies on the structure and functional properties of different δ-endotoxins revealed that the domain I by virtue of its membrane spanning hydrophobic and amphipathic α-helices is capable of forming pores in the cell membranes of the larval midgut. Domain II being hyper variable in nature determines the insecticidal specificity of a toxin and domain III is involved in varied functions like structural stability, ion channel gating, binding to Brush Border Membrane Vesicles and insecticidal specificity. Recent studies on toxin aggregation and interaction revealed that the three domains interact closely to bring about the insecticidal activity of Bt. In this review we describe the protein engineering studies conducted on different δ-endotoxins which led to an understanding of their molecular mode of action and construction of novel toxins with enhanced insecticidal activity and specificity.