Cholesterol’s effects on Na+,K+-ATPase reconstituted in phospholipid vesicles have been extensively studied. However, previous studies have reported both cholesterol-mediated stimulation and inhibition of Na+,K+-ATPase activity. Here, using partial reaction kinetics determined via stopped-flow experiments, we studied cholesterol’s effect on Na+,K+-ATPase in a near-native environment in which purified membrane fragments were depleted of cholesterol with methyl-β-cyclodextrin (mβCD). The mβCD-treated Na+,K+-ATPase had significantly reduced overall activity and exhibited decreased observed rate constants for ATP phosphorylation (ENa+3 → E2P, i.e. phosphorylation by ATP and Na+ occlusion from the cytoplasm) and K+ deocclusion with subsequent intracellular Na+ binding (E2K+2 → E1Na+3). However, cholesterol depletion did not affect the observed rate constant for K+ occlusion by phosphorylated Na+,K+-ATPase on the extracellular face and subsequent dephosphorylation (E2P → E2K+2). Thus, partial reactions involving cation binding and release at the protein’s intracellular side were most dependent on cholesterol. Fluorescence measurements with the probe eosin indicated that cholesterol depletion stabilizes the unphosphorylated E2 state relative to E1, and the cholesterol depletion-induced slowing of ATP phosphorylation kinetics was consistent with partial conversion of Na+,K+-ATPase into the E2 state, requiring a slow E2 → E1 transition before the phosphorylation. Molecular dynamics simulations of Na+,K+-ATPase in membranes with 40 mol% cholesterol revealed cholesterol interaction sites that differ markedly among protein conformations. They further disclosed state-dependent effects on membrane shape, with the E2 state being likely disfavored in cholesterol-rich bilayers relative to the E1P state because of a greater hydrophobic mismatch. In summary, cholesterol extraction from membranes significantly decreases Na+,K+-ATPase steady-state activity.