The plasma membranes of endothelial cells reaching confluence undergo profound structural and functional modifications, including the formation of adherens junctions, crucial for the regulation of vascular permeability and angiogenesis. Adherens junction formation is accompanied by the tyrosine dephosphorylation of adherens junctions proteins, which has been correlated with the strength and stability of adherens junctions. Here we show that cholesterol is a critical determinant of plasma membrane remodeling in cultures of growing cow pulmonary aortic endothelial cells. Membrane cholesterol increased dramatically at an early stage in the formation of confluent cow pulmonary aortic endothelial cell monolayers, prior to formation of intercellular junctions. This increase was accompanied by the redistribution of caveolin from a high density to a low density membrane compartment, previously shown to require cholesterol, and increased binding of the annexin II-p11 complex to membranes, consistent with other studies indicating cholesterol-dependent binding of annexin II to membranes. Furthermore, partial depletion of cholesterol from confluent cells with methyl-beta-cyclodextrin both induced tyrosine phosphorylation of multiple membrane proteins, including adherens junctions proteins, and disrupted adherens junctions. Both effects were dramatically reduced by prior complexing of methyl-beta-cyclodextrin with cholesterol. Our results reveal a novel physiological role for cholesterol regulating the formation of adherens junctions and other plasma membrane remodeling events as endothelial cells reach confluence.