The molecular basis for the essential role of cholesterol in mammalian (and other cholesterol-requiring) cells has long been the object of intense interest. Cholesterol has been found to modulate the function of membrane proteins critical to cellular function. Current literature supports two mechanisms for this modulation. In one mechanism, the requirement of 'free volume' by integral membrane proteins for conformational changes as part of their functional cycle is antagonized by the presence of high levels of cholesterol in the membrane. In the other mechanism, the sterol modulates membrane protein function through direct sterol-protein interactions. This mechanism provides an explanation for the stimulation of the activity of important membrane proteins and for the essential requirement of a structurally-specific sterol for cell viability. In some cases, these latter membrane proteins exhibit little or no activity in the absence of the specific sterol required for growth of that cell type. The specific sterol required varies from one cell type to another and is unrelated to the ability of that sterol to affect the bulk properties of the membrane.