The nanoscopic layer of water that directly hydrates biological membranes plays a critical role in maintaining the cell structure, regulating biochemical processes, and managing intermolecular interactions at the membrane interface. Therefore, comprehending the membrane structure, including its hydration, is essential for understanding the chemistry of life. While cholesterol is a fundamental lipid molecule in mammalian cells, influencing both the structure and dynamics of cell membranes, its impact on the structure of interfacial water has remained unknown. We used surface-specific vibrational sum-frequency generation spectroscopy to study the effect of cholesterol on the structure and hydration of monolayers of the lipids 1,2-dipalmitoyl-sn-glycero-3-phosphocholine (DPPC), 1,2-dioleoyl-sn-glycero-3-phosphocholine (DOPC), and egg sphingomyelin (SM). We found that for the unsaturated lipid DOPC, cholesterol intercalates in the membrane without significantly changing the orientation of the lipid tails and the orientation of the water molecules hydrating the headgroups of DOPC. In contrast, for the saturated lipids DPPC and SM, the addition of cholesterol leads to clearly enhanced packing and ordering of the hydrophobic tails. It is also observed that the orientation of the water hydrating the lipid headgroups is enhanced upon the addition of cholesterol. These results are important because the orientation of interfacial water molecules influences the cell membranes' dipole potential and the strength and specificity of interactions between cell membranes and peripheral proteins and other biomolecules. The lipid nature-dependent role of cholesterol in altering the arrangement of interfacial water molecules offers a fresh perspective on domain-selective cellular processes, such as protein binding.