Transport of proteins between intracellular membrane compartments is mediated by a protein machinery that regulates the budding and fusion processes of individual transport steps. Although the core proteins of both processes are defined at great detail, much less is known about the involvement of lipids. Here we report that changing the cellular balance of cholesterol resulted in changes of the morphology of the Golgi apparatus, accompanied by an inhibition of protein transport. By using a well characterized cell-free intra-Golgi transport assay, these observations were further investigated, and it was found that the transport reaction is sensitive to small changes in the cholesterol content of Golgi membranes. Addition as well as removal of cholesterol (10 ؎ 6%) to Golgi membranes by use of methyl--cyclodextrin specifically inhibited the intra-Golgi transport assay. Transport inhibition occurred at the fusion step. Modulation of the cholesterol content changed the lipid raft partitioning of phosphatidylcholine and heterotrimeric G proteins, but not of other (non) lipid raft proteins and lipids. We suggest that the cholesterol balance in Golgi membranes plays an essential role in intra-Golgi protein transport and needs to be carefully regulated to maintain the structural and functional organization of the Golgi apparatus.