ABCG2 (ATP-binding cassette, subfamily G, member 2) is a plasma membrane glycoprotein that actively extrudes xenobiotics and endobiotics from the cells and causes multidrug resistance in cancer. In the liver, ABCG2 is expressed in the canalicular membrane of hepatocytes and excretes its substrates into the bile. ABCG2 is known to require high membrane cholesterol content for maximal activity, and by examining purified ABCG2 reconstituted in proteoliposomes we have recently shown that cholesterol is an essential activator, while bile acids significantly modify the activity of this protein. In the present work, by using isolated insect cell membrane preparations expressing human ABCG2 and its mutant variants, we have analyzed whether certain regions in this protein are involved in sterol recognition. We found that replacing ABCG2-R482 with large amino acids does not affect cholesterol dependence, but changes to small amino acids cause altered cholesterol sensitivity. When leucines in the potential steroid-binding element (SBE, aa 555-558) of ABCG2 were replaced by alanines, cholesterol dependence of ABCG2 activity was strongly reduced, although the L558A mutant variant when purified and reconstituted still required cholesterol for full activity. Regarding the effect of bile acids in isolated membranes, we found that these compounds decreased ABCG2-ATPase in the absence of drug substrates, which did not significantly affect substrate-stimulated ATPase activity. These ABCG2 mutant variants also altered bile acid sensitivity, although cholic acid and glycocholate were not transported by the protein. We suggest that the aforementioned two regions in ABCG2 are important for sterol sensing and may represent potential targets for pharmacologic modulation of ABCG2 function.