G-protein-gated inwardly rectifying potassium (GIRK) channels are important for determining neuronal excitability. In addition to G proteins, GIRK channels are potentiated by membrane cholesterol, which is elevated in the brains of people with neurodegenerative diseases such as Alzheimer's dementia and Parkinson's disease. The structural mechanism of cholesterol modulation of GIRK channels is not well understood. In this study, we present cryo- electron microscopy (cryoEM) structures of GIRK2 in the presence and absence of the cholesterol analog cholesteryl hemisuccinate (CHS) and phosphatidylinositol 4,5-bisphosphate (PIP2). The structures reveal that CHS binds near PIP2 in lipid-facing hydrophobic pockets of the transmembrane domain. Our structural analysis suggests that CHS stabilizes PIP2 interaction with the channel and promotes engagement of the cytoplasmic domain onto the transmembrane region. Mutagenesis of one of the CHS binding pockets eliminates cholesterol-dependent potentiation of GIRK2. Elucidating the structural mechanisms underlying cholesterol modulation of GIRK2 channels could facilitate the development of therapeutics for treating neurological diseases. VIDEO ABSTRACT.