Phosphatidylserine and cholesterol are two major components of the cytoplasmic leaflet of the plasma membrane. The arrangement of cholesterol is markedly affected by the presence of phosphatidylserine in model membranes. At relatively low mol fractions of cholesterol in phosphatidylserine, compared with other phospholipids, cholesterol crystallites are formed that exhibit both thermotropic phase transitions as well as diffraction of x-rays. In the present study we have observed and characterized a novel thermotropic transition occurring in mixtures of phosphatidylserine and cholesterol. This new transition is observed at 96°C by differential scanning calorimetry (DSC), using a heating scan rate of 2°C/min. Observation of the transition requires that the hydrated lipid mixture be incubated for several days, depending on the temperature of incubation. The rate of formation of the material exhibiting a transition at 96°C is more rapid at higher incubation temperatures. At 37°C the half-time of conversion is ∼7 days. Concomitant with the appearance of the 96°C peak the previously known transitions of cholesterol, occurring at ∼38°C and 75°C on heating scans of freshly prepared suspensions, disappear. These two transitions correspond to the polymorphic transition of anhydrous cholesterol and to the dehydration of cholesterol monohydrate, respectively. The loss of the 75°C peak takes a longer time than that of the 38°C peak, indicating that anhydrous cholesterol first gets hydrated to the monohydrate form exhibiting a transition at 75°C and subsequently is converted by additional time of incubation to an altered form of the monohydrate, showing a phase transition at 96°C. After several weeks of incubation at 37°C, only the form with a phase transition at 96°C remains. If such a sample undergoes several successive heating and cooling cycles, the 96°C peak disappears and the 38°C transition reappears on heating. For samples of 1-palmitoyl-2-oleoyl phosphatidylserine or of 1-stearoyl-2-oleoyl phosphatidylserine having mol fractions of cholesterol between 0.4 and 0.7, the 38°C transition that reappears after the melting of the 96°C component generally has the same enthalpy as do freshly prepared samples. This demonstrates that, at least for these samples, the amount of anhydrous cholesterol crystallites formed is indeed a property of the lipid mixture. We have also examined variations in the method of preparation of the sample and find similar behavior in all cases, although there are quantitative differences. The 96°C transition is partially reversible on cooling and reheating. This transition is also scan rate dependent, indicating that it is, at least in part, kinetically determined. The enthalpy of the 96°C transition, after incubation of the sample for 3 weeks at 37°C is dependent on the ratio of cholesterol to 1-palmitoyl-2-oleoyl phosphatidylserine or to 1-stearoyl-2-oleoyl phosphatidylserine, with the enthalpy per mole cholesterol increasing between cholesterol mol fractions of 0.2 and 0.5. Dimyristoyl phosphatidylserine at a 1:1 molar ratio with cholesterol, after incubation at 37°C, exhibits a transition at 95°C that reverses on cooling at 44°C, instead of 60°C, as observed with either 1-palmitoyl-2-oleoyl phosphatidylserine or 1-stearoyl-2-oleoyl phosphatidylserine. These findings along with the essential absence of the 96°C transition in pure cholesterol or in cholesterol/phosphatidylcholine mixtures, indicates that the phospholipid affects the characteristics of the transition, and therefore the cholesterol crystallites must be in direct contact with the phospholipid and are not simply in the form of pure crystals of cholesterol. These observations are particularly important in view of recent observations of the presence of cholesterol crystals in biological systems.