A basis for the insulin mimetic effect of sphingomyelinase on GLUT4 translocation remains unclear. Since sphingomyelin serves as a major determinant of plasma membrane cholesterol and a relationship between plasma membrane cholesterol and GLUT4 levels has recently become apparent, we assessed whether GLUT4 translocation induced by sphingomyelinase resulted from changes in membrane cholesterol content. Exposure of 3T3-L1 adipocytes to sphingomyelinase resulted in a time-dependent loss of sphingomyelin from the plasma membrane and a concomitant time-dependent accumulation of plasma membrane GLUT4. Degradation products of sphingomyelin did not mimic this stimulatory action. Plasma membrane cholesterol amount was diminished in cells exposed to sphingomyelinase. Restoration of membrane cholesterol blocked the stimulatory effect of sphingomyelinase. Increasing concentrations of methyl--cyclodextrin, which resulted in a dose-dependent reversible decrease in membrane cholesterol, led to a dose-dependent reversible increase in GLUT4 incorporation into the plasma membrane. Although increased plasma membrane GLUT4 content by cholesterol extraction with concentrations of methyl--cyclodextrin above 5 mM most likely reflected decreased GLUT4 endocytosis, translocation stimulated by sphingomyelinase or concentrations of methyl--cyclodextrin below 2.5 mM occurred without any visible changes in the endocytic retrieval of GLUT4. Furthermore, moderate loss of cholesterol induced by sphingomyelinase or low concentrations of methyl--cyclodextrin did not alter membrane integrity or increase the abundance of other plasma membrane proteins such as the GLUT1 glucose transporter or the transferrin receptor. Regulation of GLUT4 translocation by moderate cholesterol loss did not involve known insulin signaling proteins. These data reveal that sphingomyelinase enhances GLUT4 exocytosis via a novel cholesterol-dependent mechanism.