Cholesterol is an essential component of eukaryotic membranes and plays a crucial role in membrane organization, dynamics and function. The modulatory role of cholesterol in the function of a number of membrane proteins is well established. This effect has been proposed to occur either due to a specific molecular interaction between cholesterol and membrane proteins or due to alterations in the membrane physical properties induced by the presence of cholesterol. The contemporary view regarding heterogeneity in cholesterol distribution in membrane domains that sequester certain types of membrane proteins while excluding others has further contributed to its significance in membrane protein function. The seven transmembrane domain G-protein coupled receptors (GPCRs) are among the largest protein families in mammals and represent approximately 2% of the total proteins coded by the human genome. Signal transduction events mediated by this class of proteins are the primary means by which cells communicate with and respond to their external environment. GPCRs therefore represent major targets for the development of novel drug candidates in all clinical areas. In view of their importance in cellular signaling, the interaction of cholesterol with such receptors represents an important determinant in functional studies of such receptors. This review focuses on the effect of cholesterol on the membrane organization and function of GPCRs from a variety of sources, with an emphasis on the more contemporary role of cholesterol in maintaining a domain-like organization of such receptors on the cell surface. Importantly, the recently reported role of cholesterol in the function and organization of the neuronal serotonin(1A) receptor, a representative of the GPCR family which is present endogenously in the hippocampal region of the brain, will be highlighted.