The human ABCG2 multidrug transporter provides protection against numerous toxic compounds and causes multidrug resistance in cancer. Here we examined the effects of changes in membrane cholesterol on the function of this protein. Human ABCG2 was expressed in mammalian and in Sf9 insect cells, and membrane cholesterol depletion or enrichment was achieved by preincubation with beta cyclodextrin or its cholesterol-loaded form. We found that mild cholesterol depletion of intact mammalian cells inhibited ABCG2-dependent dye and drug extrusion in a reversible fashion, while the membrane localization of the transporter protein was unchanged. Cholesterol enrichment of cholesterol-poor Sf9 cell membrane vesicles greatly increased ABCG2-driven substrate uptake, substrate-stimulated ATPase activity, as well as the formation of a catalytic cycle intermediate (nucleotide trapping). Interestingly, modulation of membrane cholesterol did not significantly affect the function of the R482G or R482T substrate mutant ABCG2 variants, or that of the MDR1 transporter. The selective, major effect of membrane cholesterol on the wild-type ABCG2 suggests a regulation of the activity of this multidrug transporter during processing or in membrane micro-domain interactions. The experimental recognition of physiological and pharmacological substrates of ABCG2, as well as the fight against cancer multidrug resistance may be facilitated by demonstrating the key role of membrane cholesterol in this transport activity.