Interaction of the local anesthetic dibucaine with small unilamellar vesicles of dimyristoylphosphatidylcholine (DMPC) and dioleoyl phosphatidylcholine (DOPC) containing different mol percents of cholesterol has been studied by fluorescence spectroscopy. Fluorescence measurements on dibucaine in presence of phospholipid vesicles containing various amounts of cholesterol yielded a pattern of variation of wavelength at emission maximum and steady-state anisotropy which indicated that the microenvironment of dibucaine is more polar and flexible in membranes that contain cholesterol than in membranes without cholesterol. Experiments on quenching of fluorescence from membrane-associated dibucaine by potassium iodide showed a marked increase in quenching efficiency as the cholesterol content of the vesicles was increased, demonstrating increased accessibility of the iodide quenchers to dibucaine in the presence of cholesterol, when compared to that in its absence. Total emission intensity decay profiles of dibucaine yielded two lifetime components of ~1 ns and ~2.8-3.1 ns with mean relative contributions of ~25 and ~75%, respectively. The mean lifetime in vesicles was 20-30% smaller than in the aqueous medium and showed a moderate variation with cholesterol content. Fluorescence measurements at two different temperatures in DMPC SUVs, one at 33 o C, above the phase transition temperature and another at 25 o C, around the main phase transition, indicated two different mode of dibucaine localization. At 25 o C dibucaine partitioned differentially in presence and absence of cholesterol. However, at 33 o C the apparent partition coefficients remained unaltered indicating differences in the microenvironment of dibucaine in presence and absence of cholesterol in the phospholipid membranes.