Abstract M54 is a prototype for a globular cluster embedded in a dark matter halo. Gaia Early Data Release 3 photometry and proper motions separate the old, metal-poor stars from the more metal-rich and younger dwarf galaxy stars. The metal-poor stars dominate the inner 50 pc, with a velocity dispersion profile that declines to a minimum around 30 pc then rises back to nearly the central velocity dispersion, as expected for a globular cluster at the center of a cold dark matter (CDM) cosmology dark matter halo. The Jeans equation mass analysis of the three separate stellar populations gives consistent masses that rise approximately linearly with radius to 1 kpc. These data are compatible with an infalling CDM dark matter halo reduced to ≃3 × 108 M ⊙ at the 50 kpc apocenter 2.3 Gyr ago, with a central globular cluster surrounded by the remnant of a dwarf galaxy. Tides gradually remove material beyond 1 kpc but have little effect on the stars and dark matter within 300 pc of the center. M54 appears to be a “transitional” system between globular clusters with and without local dark halos whose evolution within the galaxy depends on the time of accretion and orbital pericenter.