The serotonin1A receptor is the most extensively studied member of the family of seven transmembrane domain G-protein coupled serotonin receptors. Serotonergic signaling appears to play a key role in the generation and modulation of various cognitive and behavioral functions such as sleep, mood, pain, addiction, locomotion, sexual activity, depression, anxiety, alcohol abuse, aggression and learning. Since a significant portion of the protein lies embedded in the membrane and the ligand-binding pocket is defined by the transmembrane stretches in such receptors, membrane composition and organization represent a crucial parameter in the structure-function analysis of G-protein coupled receptors. In this paper, we have monitored the role of membrane cholesterol in the ligand-binding function of the hippocampal serotonin1A receptor. Our results demonstrate that the reduction of membrane cholesterol significantly attenuates the antagonist-binding function of the serotonin1A receptor. Based on prior pharmacological knowledge regarding the requirements for the antagonist to bind the receptor, our results indicate that membrane cholesterol modulates receptor function independently of its ability to interact with G-proteins. These effects on ligand-binding function of the receptor are predominantly reversed upon cholesterol-replenishment of cholesterol-depleted membranes. When viewed in the light of our earlier results on the effect of cholesterol depletion on the serotonin1A receptor/G-protein interaction, these results comprehensively demonstrate the importance of cholesterol in the serotonin1A receptor function and form the basis for understanding lipid-protein interactions involving this important neuronal receptor.