In recent years, cholesterol has been emerging as a major regulator of ion channel function. The most common effect of cholesterol on ion channels is a decrease in channel activity that may include a decrease in the open probability, in the unitary conductance and/or in the number of active channels in the membrane. Yet, the mechanism by which cholesterol affects channel function is unclear.Here we focus on Kir2 channels, a subfamily of constitutively active, strongly inwardly rectifying K+ channels that set the resting membrane potential and modulate membrane excitability.We have previously shown that the function of Kir2 channels is suppressed by the elevation of membrane cholesterol and enhanced by cholesterol depletion. Furthermore, our earlier studies have shown that cholesterol sensitivity of Kir2 channels critically depends on a group of residues that form a belt-like structure around the cytosolic pore of the channel in proximity to the transmembrane domain. Surprisingly, however, each of the mutations of the cholesterol sensitivity belt residues that abrogated the cholesterol sensitivity of Kir2.1 also converted these residues to the corresponding residue in Kir2.2. This was completely unexpected because cholesterol sensitivities of Kir2.1 and Kir2.2 channels are very similar.In this study, we used this phenomenon to gain further insights into cholesterol sensitivity of Kir2 channels. Focusing on the L222I mutation, we screened the differences in the cytosolic domain between Kir2.1 and Kir2.2. Our analysis led to the identification of residues in the N-terminus and in the EF and GA loops of the C-terminus that reversed the effect of the L222I mutation on the cholesterol sensitivity of Kir2.1. These results indicate that an allosteric coupling between the N- and C- termini plays a critical role in cholesterol modulation of Kir2 channels.