The effect of cholesterol on the structure of phosphatidylcholine bilayer was investigated by X-ray diffraction methods. Electron density profiles at 5 A resolution along with chain tilt and chain packing parameters were obtained and compared for phosphatidylcholine/cholesterol bilayers and for pure phosphatidylcholine bilayers in both the gel and liquid crystalline states. The cholesterol in the bilayers was localized by noting the position of discrete elevations in the electron density profiles. Cholesterol can either increase or decrease the width of the bilayer depending on the physical state and chain length of the lipid before the introduction of cholesterol. For saturated phosphatidylcholines containing 12--16 carbons per chain, cholesterol increases the width of the bilayer as it removes the chain tilt from gel state lipids or increases the trans conformations of the chains for liquid crystalline lipids. However, cholesterol reduces the width of 18 carbon chain bilayers below the phase transition temperature as the long phospholipid chains must deform or kink to accomodate the significantly shorter cholesterol molecule. Although cholesterol has a marked effect on hydrocarbon chain organization, it was found that, within the resolution limits of the data, the phosphatidylcholine head group conformation is unchanged by the addition of cholesterol to the bilayer. The head group is oriented parallel to the plane of the bilayer for phosphatidylcholine in the gel and liquid crystalline states and this orientation is not changed by the addition of cholesterol.