Oxysterol-binding protein (OSBP) is the founding member of a family of sterol-binding proteins implicated in vesicle transport, lipid metabolism, and signal transduction. Here, OSBP was found to function as a cholesterol-binding scaffolding protein coordinating the activity of two phosphatases to control the extracellular signal-regulated kinase (ERK) signaling pathway. Cytosolic OSBP formed a approximately 440-kilodalton oligomer with a member of the PTPPBS family of tyrosine phosphatases, the serine/threonine phosphatase PP2A, and cholesterol. This oligomer had dual specific phosphatase activity for phosphorylated ERK (pERK). When cell cholesterol was lowered, the oligomer disassembled and the level of pERK rose. The oligomer also disassembled when exposed to oxysterols. Increasing the amount of OSBP oligomer rendered cells resistant to the effects of cholesterol depletion and decreased the basal level of pERK. Thus, cholesterol functions through its interaction with OSBP outside of membranes to regulate the assembly of an oligomeric phosphatase that controls a key signaling pathway in the cell.