The serotonin(1A) (5-HT(1A)) receptor is an important member of the superfamily of seven-transmembrane domain G-protein-coupled receptors. We have examined the modulatory role of cholesterol on the ligand binding activity and G-protein coupling of the bovine hippocampal 5-HT(1A) receptor by depleting cholesterol from native membranes using methyl-beta-cyclodextrin (MbetaCD). Removal of cholesterol from bovine hippocampal membranes using varying concentrations of MbetaCD results in a concentration-dependent reduction in specific binding of the agonist 8-OH-DPAT to 5-HT(1A) receptors. This is accompanied by alterations in binding affinity and sites obtained from analysis of binding data. Importantly, cholesterol depletion affected G-protein-coupling of the receptor as monitored by the GTP-gamma-S assay. The concomitant changes in membrane order were reported by changes in fluorescence polarization of membrane probes such as DPH and TMA-DPH, which are incorporated at different locations (depths) in the membrane. Replenishment of membranes with cholesterol led to recovery of ligand binding activity as well as membrane order to a considerable extent. Our results provide evidence, for the first time, that cholesterol is necessary for ligand binding and G-protein coupling of this important neurotransmitter receptor. These results could have significant implications in understanding the influence of the membrane lipid environment on the activity and signal transduction of other G-protein-coupled transmembrane receptors.