Cellular membranes exhibit a huge diversity of lipids and membrane proteins that differ in their properties and chemical structure. Cells organize these molecules into distinct membrane compartments characterized by specific lipid profiles and hydrophobic thicknesses of the respective domains. If a hydrophobic mismatch occurs between a membrane protein and the surrounding lipids, there can be functional consequences like reduced protein activity. This phenomenon has been extensively studied for single-pass transmembrane proteins, rhodopsin, and small polypeptides such as gramicidin. Here we investigate the E. coli rhomboid intramembrane protease GlpG as a model to systematically explore the impact of membrane thickness on GlpG activity. We used fully saturated dilauroylpohosphatidylcholine (DLPC) and dimyristoylphosphatidylcholine (DMPC) model lipids and altered membrane thickness by varying the cholesterol content. Physical membrane parameters were determined by 2H and 31P NMR spectroscopy and correlated with GlpG activity measurements in the respective host membranes. Differences in bulk and annular lipids as well as alterations in protein structure in the respective host membranes were determined using molecular dynamics simulations. Our findings indicate that GlpG can influence the membrane thickness in DLPC/cholesterol membranes but not in DMPC/cholesterol membranes. Moreover, we observe that GlpG protease activity is reduced in DLPC membranes at low cholesterol content, which was not observed for DMPC. While a change in GlpG activity can already be due to smallest differences in the lipid environment, potentially enabling allosteric regulation of intramembrane proteolysis, there is no overall correlation to cholesterol-mediated lipid bilayer organization and phase behavior. Additional factors such as the influence of cholesterol on membrane bending rigidity and curvature energy need to be considered. In conclusion, the functionality of α-helical membrane proteins such as GlpG relies not only on hydrophobic matching but also on other membrane properties, specific lipid interaction and the composition of the annular layer.