Cholesterol is known to affect the activity of membrane-bound enzymes, including Na+/K+-ATPase. To gain insight into the mechanism of cholesterol's effect, we have used various hydrophobic fluorescent probes which insert into different regions of the membrane bilayer and report on the degree of hydration of their environment. Specifically, we have measured the generalized polarization of Laurdan and the lifetime of DPH and derivatives of DPH inserted into membranes from pig kidneys enriched in Na+/K+-ATPase. Spectral measurements were also carried out on these membranes after modification of their cholesterol content. The generalized polarization of Laurdan increased with increasing cholesterol, showing an abrupt modification at the native cholesterol content. The fluorescence lifetimes of DPH and the DPH derivatives were analyzed using a distribution model. The center value of these lifetime distributions and their widths also changed with increasing cholesterol. One DPH derivative, DPH-PC, showed a minimum value for the lifetime center at the native cholesterol concentration, whereas the other derivatives showed a maximum value for the lifetime center at that cholesterol concentration. DPH-PC is known to sense the protein-lipid interface, whereas the other derivatives sense the bulk lipid phase. These data suggest that hydration at the protein-lipid interface is maximal at the native cholesterol concentration as is the enzymatic activity. Hydration at the protein-lipid interface is therefore proposed to be required for activity. These results are in agreement with current models of membrane dynamics and thermodynamics of protein function.