Glycine transport inhibitors show considerable promise as potential therapeutics for chronic pain. We have developed a series of potent bioactive lipids that allosterically inhibit the human glycine transporter GlyT2 (SLC6A5) and are analgesic in animal models of chronic pain. However, these compounds may be limited by toxicity due to complete or irreversible inhibition. Understanding factors that mediate potency and reversibility is essential for enhancing the clinical viability of these lipids. Molecular dynamics (MD) simulations demonstrate that following binding, cholesterol spontaneously inserts into a cavity between transmembrane domains (TMs) 1, 5 and 7. This binding site is conserved among the SLC6 family and bound cholesterol has been shown to modulate functionality and pharmacological sensitivity of the serotonin1 (SLC6A4) and dopamine2 (SLC6A3) transporters. Therefore, this study aimed to determine the effect of cholesterol on GlyT2 function and its sensitivity to bioactive lipids. Cholesterol depletion was achieved by treating Xenopus laevis oocytes expressing hGlyT2 with methyl-beta-cyclodextrin. Cholesterol depletion reduced Vmax for glycine transport and increased apparent glycine affinity – consistent with cholesterol stabilising the outward facing conformation. Cholesterol depletion also reduced potency and enhanced reversibility of the GlyT2 inhibitors oleoyl-L-lysine (OLLys) and oleoyl-L-leucine (OLLeu) but had no effect on the activity of oleoyl-L-tryptophan (OLTrp). MD simulations demonstrate that the acyl tail of OLLys and OLLeu penetrates deeper into the binding cavity facilitating interaction with cholesterol. In contrast, the acyl tail of OLTrp curls up preventing extension into the binding cavity making it unable to interact with cholesterol. These results indicate that cholesterol stabilises the binding of bioactive lipids that adopt a more extended configuration in the binding site making them more potent and less reversible. Understanding the interaction between cholesterol and these bioactive lipids will enable rational development of compounds with optimised potency and reversibility that can mitigate potential toxicity.