Recently, the covalent binding of a cholesterol moiety to a classical HIV-1 fusion inhibitor peptide, C34, was shown to potentiate its antiviral activity. Our purpose was to evaluate the interaction of cholesterol-conjugated and native C34 with membrane model systems and human blood cells to understand the effects of this derivatization. Lipid vesicles and monolayers with defined compositions were used as model membranes. C34-cholesterol partitions more to fluid phase membranes that mimic biological membranes. Importantly, there is a preference of the conjugate for liquid ordered membranes, rich in cholesterol and/or sphingomyelin, as observed both from partition and surface pressure studies. In human erythrocytes and peripheral blood mononuclear cells (PBMC), C34-cholesterol significantly decreases the membrane dipole potential. In PBMC, the conjugate was 14- and 115-fold more membranotropic than T-1249 and enfuvirtide, respectively. C34 or cholesterol alone did not show significant membrane activity. The enhanced interaction of C34-cholesterol with biological membranes correlates with its higher antiviral potency. Higher partitions for lipid-raft like compositions direct the drug to the receptor-rich domains where membrane fusion is likely to occur. This intermediary membrane binding step may facilitate the drug delivery to gp41 in its pre-fusion state.