Our earlier studies have shown that channel activity of Kir2 subfamily of inward rectifiers is strongly suppressed by the elevation of cellular cholesterol. The goal of this study is to determine whether cholesterol suppresses Kir channels directly. To achieve this goal, purified prokaryotic Kir (KirBac1.1) channels were incorporated into liposomes of defined lipid composition, and channel activity was assayed by 86Rb+ uptake. Our results show that 86Rb+ flux through KirBac1.1 is strongly inhibited by cholesterol. Incorporation of 5% (mass cholesterol/phospholipid) cholesterol into the liposome suppresses 86Rb+ flux by >50%, and activity is completely inhibited at 12-15%. However, epicholesterol, a stereoisomer of cholesterol with similar physical properties, has significantly less effect on KirBac-mediated 86Rb+ uptake than cholesterol. Furthermore, analysis of multiple sterols suggests that cholesterol-induced inhibition of KirBac1.1 channels is mediated by specific interactions rather than by changes in the physical properties of the lipid bilayer. In contrast to the inhibition of KirBac1.1 activity, cholesterol had no effect on the activity of reconstituted KscA channels (at up to 250 μg/mg of phospholipid). Taken together, these observations demonstrate that cholesterol suppresses Kir channels in a pure protein-lipid environment and suggest that the interaction is direct and specific.