Anesthesia, a state of being absent of sensation and consciousness, has been recognized since antiquity. Even today anesthesia is still best characterized by the lack of consciousness and sensations. Since anesthetic potency is correlated with lipid solubility, the site of action of general anesthetics has been thought to be hydrophobic in nature and to involve excitable membranes critical for interneuronal communications. Thus, general anesthetics may interact directly with functionally-relevant membrane proteins (via hydrophobic pockets) or indirectly, with the lipids surrounding these proteins. To better understand the details of general anesthetic action, I examined how halothane interacts with a functional synaptic protein, the acetylcholine receptor channel embedded in the membranes of cultured Xenopus myocytes. Next, I examined how changing the lipid composition, of these membranes, affected this interaction. Using the extracellular patch-clamp technique, I found that halothane, at clinically-relevant concentrations, shortened the burst duration of single receptor channels without affecting their conductance. Moreover, the halothane-induced reduction of burst durations was significantly attenuated after pretreatment with cholesterol-rich lipsomes which increased significantly the cholesterol content of these cells. These findings provide the first direct support for the role of membrane lipids in the mechanism of GA action. In particular, I demonstrated that increases in membrane cholesterol antagonize the anesthetic action of halothane. Although direct action of cholesterol on synaptic proteins cannot be ruled out, my data strongly suggest that membrane lipids are involved at a critical, but as yet undefined, site with which GAs interact. The exact manner by which increases in membrane cholesterol antagonize GA action remains to be eludicated.