The binding of HDL to scavenger receptor-BI (SR-BI) mediates cholesterol movement. HDL also induces multiple cellular signals, which in endothelium occur through SR-BI and converge to activate eNOS. To determine the molecular basis of a signaling event induced by HDL, we examined the proximal mechanisms in HDL activation of eNOS. In endothelial cells, HDL and methyl-beta-cyclodextrin caused comparable eNOS activation, whereas cholesterol-loaded methyl-beta-cyclodextrin had no effect. Phosphatidylcholine-loaded HDL caused greater stimulation than native HDL, and blocking antibody against SR-BI, which prevents cholesterol efflux, prevented eNOS activation. In a reconstitution model in COS-M6 cells, wild-type SR-BI mediated eNOS activation by both HDL and small unilamellar vesicles (SUVs), whereas the SR-BI mutant AVI, which is incapable of efflux to SUV, transmitted signal by only HDL. In addition, eNOS activation by methyl-beta-cyclodextrin was SR-BI dependent. Studies of mutant and chimeric class B scavenger receptors revealed that the C-terminal cytoplasmic PDZ-interacting domain and the C-terminal transmembrane domains of SR-BI are both necessary for HDL signaling. Furthermore, we demonstrated direct binding of cholesterol to the C-terminal transmembrane domain using a photoactivated derivative of cholesterol. Thus, HDL signaling requires cholesterol binding and efflux and C-terminal domains of SR-BI, and SR-BI serves as a cholesterol sensor on the plasma membrane.