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Pannexin1 (Panx1) is expressed in both neurons and glia where it forms ATP-permeable channels that are activated under pathological conditions such as epilepsy, migraine, inflammation, and ischemia. Membrane lipid composition affects proper distribution and function of receptors and ion channels, and defects in cholesterol metabolism are associated with neurological diseases. In order to understand the impact of membrane cholesterol on the distribution and function of Panx1 in neural cells, we used fluorescence recovery after photobleaching (FRAP) to evaluate its mobility and electrophysiology and dye uptake to assess channel function. We observed that cholesterol extraction (using methyl-β-cyclodextrin) and inhibition of its synthesis (lovastatin) decreased the lateral diffusion of Panx1 in the plasma membrane. Panx1 channel activity (dye uptake, ATP release and ionic current) was enhanced in cholesterol-depleted Panx1 transfected cells and in wild-type astrocytes compared to non-depleted or Panx1 null cells. Manipulation of cholesterol levels may, therefore, offer a novel strategy by which Panx1 channel activation might modulate various pathological conditions.