Cholesterol was found to inhibit full fusion of oppositely charged phospholipid bilayer vesicles by stabilizing the contacting membranes at the stage of the hemifused intermediate. Vesicles of opposite charge containing different amounts of cholesterol were prepared using cationic (1,2-dioleoyl-sn-glycero-3-ethylphosphocholine) and anionic (dioleoylphosphatidylglycerol) phospholipids. Pairwise interactions between such vesicles were observed by fluorescence video microscopy in real time after electrophoretically maneuvering the vesicles into contact. Hemifusion accounted for more than 80% of the observed events when the vesicles contained 33-50 mole% cholesterol. In contrast, vesicles containing only a small proportion of cholesterol (</=10 mole%), underwent full fusion in approx. 70% of the interactions monitored. The role of cholesterol is explained both as favoring the formation of the hemifused intermediate according to the adhesion-condensation mechanism of bilayer fusion and as disfavoring the transition from hemifusion to full fusion on the basis of reduced tension in the vesicle bilayers.