Ergosterol depletion independently inhibits two aspects of yeast mating: pheromone signaling and plasma membrane fusion. In signaling, ergosterol participates in the recruitment of Ste5 to a polarized site on the plasma membrane. Ergosterol is thought to form microdomains within the membrane by interacting with the long acyl chains of sphingolipids. We find that although sphingolipid-free ergosterol is concentrated at sites of cell-cell contact, transmission of the pheromone signal at contact sites depends on a balanced ratio of ergosterol to sphingolipids. If a mating pair forms between ergosterol-depleted cells despite the attenuated pheromone response, the subsequent process of membrane fusion is retarded. Prm1 also participates in membrane fusion. However, ergosterol and Prm1 have independent functions and only prm1 mutant mating pairs are susceptible to contact-dependent lysis. In contrast to signaling, plasma membrane fusion is relatively insensitive to sphingolipid depletion. Thus, the sphingolipid-free pool of ergosterol promotes plasma membrane fusion.