The nicotinic acetylcholine receptor (nAChR) is a cation-selective channel central to both neuronal and muscular processes and is considered the prototype for ligand-gated ion channels, motivating a structural determination effort that spanned several decades [Unwin N (2005) Refined structure of the nicotinic acetylcholine receptor at 4 Å resolution. J Mol Biol 346:967–989]. Purified nAChR must be reconstituted in a mixture containing cholesterol to function. Proposed modes of interaction between cholesterol and the protein range from specific binding to indirect membrane-mediated mechanisms. However, the underlying cause of nAChR sensitivity to cholesterol remains controversial, in part because the vast majority of functional studies were conducted before a medium resolution structure was reported. We show that the nAChR contains internal sites capable of containing cholesterol, whose occupation stabilizes the protein structure. We detect sites at the protein–lipid interface as conventionally predicted from functional data, as well as deeply buried sites that are not usually considered. Molecular dynamics simulations reveal that occupation of both superficial and deeply buried sites most effectively preserves the experimental structure; the structure collapses in the absence of bound cholesterol. In particular, we find that bound cholesterol directly supports contacts between the agonist-binding domain and the pore that are thought to be essential for activation of the receptor. These results likely apply to those other ion channels within the Cys-loop superfamily that depend on cholesterol, such as the GABA receptor.