Detergent-insoluble membrane domains, enriched in saturated lipids and cholesterol, have been implicated in numerous biological functions. To understand how cholesterol promotes domain formation, the effect of various sterols and sterol derivatives on domain formation in mixtures of the saturated lipid dipalmitoylphosphatidylcholine (DPPC) and a fluorescence quenching analogue of an unsaturated lipid was compared. Quenching measurements demonstrated that several sterols (cholesterol, dihydrocholesterol, epicholesterol, and 25-hydroxycholesterol) promote formation of DPPC-enriched domains. Other sterols and sterol derivatives had little effect on domain formation (cholestane and lanosterol) or, surprisingly, strongly inhibit it (coprostanol, androstenol, cholesterol sulfate, and 4-cholestenone). The effect of sterols on domain formation was closely correlated with their effects on DPPC insolubility. Those sterols that promoted domain formation increased DPPC insolubility, whereas those sterols that inhibit domain formation decreased DPPC insolubility. The effects of sterols on the fluorescence polarization of diphenylhexatriene incorporated into DPPC-containing vesicles were also correlated with sterol structure. These experiments indicate that the effect of sterol on the ability of saturated lipids to form a tightly packed (i.e., tight in the sense that the lipids are closely packed with one another) and ordered state is the key to their effect on domain formation. Those sterols that promote tight packing of saturated lipids promote domain formation, while those sterols that inhibited tight packing of saturated lipids inhibited domain formation. The ability of some sterols to inhibit domain formation (i.e., act as "anti-cholesterols") should be a valuable tool for examining domain formation and properties in cells.