The ubiquity of cholesterol in cell membranes and changes in its concentration during development, aging and in various diseases suggest that it plays an important role in modulating cell function. We examined this possibility by monitoring the effects of cholesterol on the activity of the calcium-activated potassium (BK) channel reconstituted into lipid bilayers from rat brain homogenates. Increasing the cholesterol concentration to 11% of total lipid weight resulted in a 70% reduction in channel mean open time and a reduction of the open probability of the channel by 80%. Channel conductance was reduced by 7%. Cholesterol is known to change the order state and the modulus of compressibility of bilayers. These physico-chemical changes may be translated into an overall increase in the structural stress in the bilayer, and this force may be transmitted to proteins residing therein. By examining the characteristics of the BK channel as a function of temperature, in the presence and absence of cholesterol, we were able to estimate the activation energy based on Arrhenius plots of channel kinetics. Cholesterol reduced the activation energy of the BK channel by 50% for the open to closed transition. This result is consistent with an increased stress energy in the bilayer and favors the channel moving into the closed state. Taken together, these data are consistent with a model in which cholesterol induces structural stress which enhances the transition from the open to the closed state of the channel. We suggest that this is an important mechanism for regulating the activity of membrane-integral proteins and therefore membrane function, and that the concept of structural stress may be relevant to understanding the modulation of ion channel activity in cell membranes.