Recently, continuous droplet interface crossing encapsulation (cDICE) was developed, which allows fast and efficient production of giant unilamellar vesicles (GUVs) under high salt conditions, at low temperature and with low consumption of the encapsulated proteins. Unfortunately, cholesterol encapsulation within the lipid bilayer was not efficient for the cDICE protocol so far and thus the formation of phase separated vesicles was limited. Here we present a modified version of cDICE that allows incorporation of cholesterol into lipid bilayers and enables the reproducible formation of phase-separated vesicles. We show that cholesterol incorporation relies on the amount of mineral oil in the lipid-oil emulsions, which is essential for protein encapsulation inside GUVs by cDICE. The possibility of creating phase separated vesicles by cDICE will enable the study of the interdependence between phase separation and cytoskeletal proteins under confinement.