Lipid rafts play critical roles in many aspects of the influenza A virus life cycle. Cholesterol is a critical structural component of lipid rafts, and depletion of cholesterol leads to disorganization of lipid raft microdomains. In this study, we have investigated the effect of cholesterol depletion by methyl-beta-cyclodextrin (MbetaCD) treatment on influenza virus budding. When virus-infected Madin-Darby canine kidney cells were treated with MbetaCD at the late phase of infection for a short duration, budding of virus particles, as determined by protein analysis and electron microscopy, increased with the increasing concentration and length of treatment. However, infectious virus yield varied, depending on the concentration and duration of MbetaCD treatment. Low concentration of MbetaCD increased infectious virus yield throughout the treatment period, but higher concentrations caused an initial increase of infectious virus titer followed by decrease with longer duration. Relative infectivity of the released virus particles, on the other hand, decreased with the increasing concentration and duration of MbetaCD treatment. Loss of infectivity of virus particles is due to multiple effects by MbetaCD-mediated cholesterol depletion causing disruption of lipid rafts, changes in structural integrity of the viral membrane, leakage of viral proteins, nick/hole on the viral envelope and disruption of the virus structure. Exogenous cholesterol increased lipid raft integrity, inhibited particle release, and partially, restored the infectivity of the released virus particles. These data show that disruption of lipid rafts by cholesterol depletion caused an enhancement of virus particle release from infected cells and a decrease in infectivity of virus particles.