MDR1 (multidrug resistance 1)/P-glycoprotein is an ATP-driven transporter which excretes a wide variety of structurally unrelated hydrophobic compounds from cells. It is suggested that drugs bind to MDR1 directly from the lipid bilayer and that cholesterol in the bilayer also interacts with MDR1. However, the effects of cholesterol on drug-MDR1 interactions are still unclear. To examine these effects, human MDR1 was expressed in insect cells and purified. The purified MDR1 protein was reconstituted in proteoliposomes containing various concentrations of cholesterol and enzymatic parameters of drug-stimulated ATPase were compared. Cholesterol directly binds to purified MDR1 in a detergent soluble form and the effects of cholesterol on drug-stimulated ATPase activity differ from one drug to another. The effects of cholesterol on K(m) values of drug-stimulated ATPase activity were strongly correlated with the molecular mass of that drug. Cholesterol increases the binding affinity of small drugs (molecular mass <500 Da), but does not affect that of drugs with a molecular mass of between 800 and 900 Da, and suppresses that of valinomycin (molecular mass >1000 Da). V(max) values for rhodamine B and paclitaxel are also increased by cholesterol, suggesting that cholesterol affects turnover as well as drug binding. Paclitaxel-stimulated ATPase activity of MDR1 is enhanced in the presence of stigmasterol, sitosterol and campesterol, as well as cholesterol, but not ergosterol. These results suggest that the drug-binding site of MDR1 may best fit drugs with a molecular mass of between 800 and 900 Da, and that cholesterol may support the recognition of smaller drugs by adjusting the drug-binding site and play an important role in the function of MDR1.