Differential scanning calorimetry (DSC) and fluorescence spectroscopy were used to investigate the phase behavior of hydrated distearoylphosphatidylcholine (DSPC), and determine the effects of ethanol on DSPC with and without 2 mol% cholesterol. The biphasic effect, in which the main transition temperature decreases at low concentrations but increases at high concentrations, was observed above 3.5% ethanol with the induction of the interdigitated phase in both systems. For the fluorescence studies, 1,6-diphenyl-1,3,5-hexatriene (DPH) was incorporated into the bilayers to monitor the phase transitions through the displacement of DPH. This fluorescent probe was used to directly determine the onset of interdigitation in the lipid bilayers as indicated by a great decrease in the DPH fluorescence intensity. The addition of cholesterol lowered and broadened the phase transition temperatures of DSPC. However, results indicate that 2 mol% cholesterol did not have a significant effect on the induction of the interdigitated phase in DSPC.