ABCG2, a transporter of the ATP-binding cassette family, is known to play a prominent role in the absorption, distribution, metabolism, and excretion of xenobiotics. Drug-transporter interactions are commonly screened by high-throughput systems using transfected insect and/or human cell lines. The determination of ABCG2-ATPase activity is one method to identify ABCG2 substrate and inhibitors. We demonstrate that the ATPase activities of the human ABCG2 transfected Sf9 cell membranes (MXR-Sf9) and ABCG2-overexpressing human cell membranes (MXR-M) differ. Variation due to disparity in the glycosylation level of the protein had no effect on the transporter. The influence of cholesterol on ABCG2-ATPase activity was investigated because the lipid compositions of insect and human cells are largely different from each other. Differences in cholesterol content, shown by cholesterol loading and depletion experiments, conferred the difference in stimulation of basal ABCG2-ATPase of the two cell membranes. Basal ABCG2-ATPase activity could be stimulated by sulfasalazine, prazosin, and topotecan, known substrates of ABCG2 in cholesterol-loaded MXR-Sf9 and MXR-M cell membranes. In contrast, ABCG2-ATPase could not be stimulated in MXR-Sf9 or in cholesterol-depleted MXR-M membranes. Moreover, cholesterol loading significantly improved the drug transport into inside-out membrane vesicles prepared from MXR-Sf9 cells. MXR-M and cholesterol-loaded MXR-Sf9 cell membranes displayed similar ABCG2-ATPase activity and vesicular transport. Our study indicates an essential role of membrane cholesterol for the function of ABCG2.