The activity of large conductance, Ca2+-sensitive K+ (BKCa) channels, known to control neuronal excitability, is increased by ethanol (EtOH) exposure. Moreover, brain cholesterol (CHS) is elevated after chronic exposure to EtOH, suggesting that membrane CHS may play a role in drug tolerance. Here, we use BKCa channels from human brain (hslo subunits), reconstituted into 1-palmitoyl-2-oleoyl phosphatidylethanolamine/1-palmitoyl-2-oleoyl phosphatidylserine (POPS) bilayers, to examine CHS modulation of EtOH sensitivity. Acute exposure to clinically relevant EtOH levels increases channel activity without modifying conductance. In this minimal system, increases in CHS content within the range found in neuronal membranes lead to progressive antagonism of EtOH action. Furthermore, CHS inhibits basal channel activity with an affinity similar to that of CHS blunting of the alcohol effect. Modification of channel gating by either EtOH or CHS is reduced dramatically by removal of POPS from the bilayer, suggesting a common mechanism(s) of action. Indeed, channel dwell-time analysis indicates that CHS and EtOH exert opposite actions on the stability of channel closed states. However, each agent also acts on distinct dwell states not mirrored by the other, which contribute to the opposite effects of CHS and EtOH on channel gating.