Although encystation (or cyst formation) is an important step of the life cycle of Giardia, the cellular events that trigger encystation are poorly understood. Because membrane microdomains are involved in inducing growth and differentiation in many eukaryotes, we wondered if these raft-like domains are assembled by this parasite and participate in the encystation process. Since the GM1 ganglioside is a major constituent of mammalian lipid rafts (LRs) and known to react with cholera toxin B (CTXB), we used Alexa Fluor-conjugated CTXB and GM1 antibodies to detect giardial LRs. Raft-like structures in trophozoites are located in the plasma membranes and on the periphery of ventral discs. In cysts, however, they are localized in the membranes beneath the cyst wall. Nystatin and filipin III, two cholesterol-binding agents, and oseltamivir (Tamiflu), a viral neuraminidase inhibitor, disassembled the microdomains, as evidenced by reduced staining of trophozoites with CTXB and GM1 antibodies. GM1-and cholesterol-enriched LRs were isolated from Giardia by density gradient centrifugation and found to be sensitive to nystatin and oseltamivir. The involvement of LRs in encystation could be supported by the observation that raft inhibitors interrupted the biogenesis of encystation-specific vesicles and cyst production. Furthermore, culturing of trophozoites in dialyzed medium containing fetal bovine serum (which is low in cholesterol) reduced raft assembly and encystation, which could be rescued by adding cholesterol from the outside. Our results suggest that Giardia is able to form GM1-and cholesterol-enriched lipid rafts and these raft domains are important for encystation.