In the search to uncover ethanol's molecular mechanisms, the calcium and voltage activated, large conductance potassium channel (BK) has emerged as an important molecule. We examine how cholesterol content in bilayers of 1,2-dioleoyl-3-phosphatidylethanolamine (DOPE)/sphingomyelin (SPM) and 1-palmitoyl-2-oleoyl-sn-glycero-3-phosphatidylethanolamine (POPE)/1-palmitoyl-2-oleoyl-sn-glycero-3-phosphatidylserine (POPS) affect the function and ethanol sensitivity of BK. In addition, we examine how manipulation of cholesterol in biological membranes modulates ethanol's actions on BK. We report that cholesterol levels regulate the change in BK channel open probability elicited by 50 mM ethanol. Low levels of cholesterol (<20%, molar ratio) supports ethanol activation, while high levels of cholesterol leads to ethanol inhibition of BK. To determine if cholesterol affects BK and its sensitivity to ethanol through a direct cholesterol-protein interaction or via an indirect action on the lipid bilayer, we used the synthetic enantiomer of cholesterol (ent-CHS). We found that 20% and 40% ent-CHS had little effect on the ethanol sensitivity of BK, when compared with the same concentration of nat-CHS. We accessed the effects of ent-CHS and nat-CHS on the molecular organization of DOPE/SPM monolayers at the air/water interface. The isotherm data showed that ent-CHS condensed DOPE/SPM monolayer equivalently to nat-CHS at a 20% concentration, but slightly less at a 40% concentration. Atomic force microscopy (AFM) images of DOPE/SPM membranes in the presence of ent-CHS or nat-CHS prepared with LB technique or vesicle deposition showed no significant difference in topographies, supporting the interpretation that the differences in actions of nat-CHS and ent-CHS on BK channel are not likely from a generalized action on bilayers. We conclude that membrane cholesterol influences ethanol's modulation of BK in a complex manner, including an interaction with the channel protein. Finally, our results suggest that an understanding of membrane protein function and modulation is impossible unless protein and surrounding lipid are considered as a functional unit.