The objective of this work was to examine the interaction of cholesterol with both phosphatidylcholines, l-palmitoyl-2-oleoyl-sn-glycero-3-phosphocholine (POPC) or 1,2-dipalmitoyl-sn-glycero-3-phosphocholine IDPPC), and sphingomyelins, N-oleoyl-D-sphingomyelin (O-SPM) or N-palmitoyl-o-sphingomyelin (P-SPM), in monolayers at an air/water interlace. We used cholesterol oxidase to probe for the relative strength of sterol-phospholipid interaction, and fluorescence microscopy to visualize lateral domain formation in the mixed monolayers. The ternary mixed monolayers, which contained cholesterol, POPC, and O-SPM had a twofold higher average oxidation rate than the corresponding system containing DPPC and P-SPM. This difference in oxidation rate between saturated and unsaturated systems was observed irrespective of the ratio between phosphatidylcholine and sphingomyelin in the monolayer. With either the saturated or the unsaturated systems, however, the rate of oxidation was influenced by the ratio of phosphatidylcholine to sphingomyelin. As the monolayer content of phosphatidylcholine increased and the sphingomyelin content decreased correspondingly (to maintain a constant cholesterol-to-phospholipid molar ratio), an increase in the average oxidation rate was seen in both saturated and mono-unsaturated monolayer systems. The relationship between the rate of cholesterol oxidation and the phosphatidylcholine/sphingomyelin ratio was not linear, suggesting a preferential interaction of cholesterol with sphingomyelin even when phosphatidylcholine was present in the monolayer. The formation and stability of cholesterol-rich lateral (liquid-condensed) domains in the monolayers, as determined by monolayer fluorescence microscopy, was found to be highly influenced by the phospholipid class, the degree of acyl chain saturation, and by the ratio of phosphatidylcholine to sphingomyelin in the monolayer. The differences in cholesterol oxidation rates and lateral domain formation, as a function of the ratio of two phospholipids in the monolayers, apparently derived from differences in the hydrophobic interactions between the lipids.