Animal cells control their membrane lipid composition within narrow limits, but the sensing mechanisms underlying this control are largely unknown. Recent studies disclosed a protein network that controls the level of one lipid—cholesterol. This network resides in the endoplasmic reticulum (ER). A key component is Scap, a tetrameric ER membrane protein that binds cholesterol. Cholesterol binding prevents Scap from transporting SREBPs to the Golgi for activation. Using a new method to purify ER membranes from cultured cells, we show that Scap responds cooperatively to ER cholesterol levels. When ER cholesterol exceeds 5% of total ER lipids (molar basis), SREBP-2 transport is abruptly blocked. Transport resumes when ER cholesterol falls below the 5% threshold. The 5% threshold is lowered to 3% when cells overexpress Insig-1, a Scap-binding protein. Cooperative interactions between cholesterol, Scap, and Insig create a sensitive switch that controls the cholesterol composition of cell membranes with remarkable precision.