We previously demonstrated that a caveolin-chaperone complex transports newly synthesized cholesterol from the endoplasmic reticulum through the cytoplasm to caveolae. Caveolin-1 has a 33-amino acid hydrophobic domain and three sites of palmitoylation in proximity to the hydrophobic domain. In the present study, we hypothesized that palmitoylation of caveolin-1 is necessary for binding of cholesterol, formation of a caveolin-chaperone transport complex, and rapid, direct transport of cholesterol to caveolae. To test this hypothesis, four caveolin-1 constructs were generated that substituted an alanine for a cysteine at position 133, 143, or 156 or all three sites (triple mutant). These mutated caveolins and wild type caveolin-1 were stably expressed in the lymphoid cell line, L1210-JF, which does not express caveolin-1, does not form a caveolin-chaperone complex, and does not transport newly synthesized cholesterol to caveolae. All of the caveolins were expressed and the proteins localized to plasma membrane caveolae. Wild type caveolin-1 and mutant 133 assembled into complete transport complexes and rapidly (10-20 min) transported cholesterol to caveolae. Caveolin mutants 143 and 156 did not assemble into complete transport complexes, weakly associated with cholesterol, and transported small amounts of cholesterol to caveolae. The triple mutant did not assemble into complete transport complexes and did not associate with cholesterol. We conclude that palmitoylation of caveolin-1 at positions 143 and 156 is required for cholesterol binding and transport complex formation.