The membrane dipole potential, ψd, is an electrical potential difference with a value typically in the range 150–350 mV (positive in the membrane interior) which is located in the lipid headgroup region of the membrane, between the linkage of the hydrocarbon chains to the phospholipid glycerol backbone and the adjacent aqueous solution. At its physiological level in animal plasma membranes (up to 50 mol%), cholesterol makes a significant contribution to ψd of approximately 65 mV; the rest arising from other lipid components of the membrane, in particular phospholipids. Via its effect on ψd, cholesterol may modulate the activity of membrane proteins. This could occur through preferential stabilization of protein conformational states. Based on its effect on ψd, cholesterol would be expected to favour protein conformations associated with a small local hydrophobic membrane thickness. Via its membrane condensing effect, which also produces an increase in ψd, cholesterol could further modulate interactions of polybasic cytoplasmic extensions of membrane proteins, in particular P-type ATPases, with anionic lipid headgroups on the membrane surface, thus leading to enhanced conformational stabilization effects and changes to ion pumping activity.