Although dehydroergosterol (DHE) is one of the most commonly used cholesterol (CHOL) reporters, it has remained unclear why it performs well compared with most other CHOL analogues and what its possible limitations are. We present a comprehensive study of the properties of DHE using a combination of time-resolved fluorescence spectroscopy, quantum-mechanical electronic structure computations, and classical atomistic molecular dynamics simulations. We first establish that DHE mimics CHOL behavior, as previous studies have suggested, and then move on to elucidate and discuss the particular properties that render DHE so superior. We found that the main reason why DHE mimics CHOL so well is due to its ability to stand upright in a membrane in a manner that is almost identical to that of CHOL. The minor difference in how DHE and CHOL tilt with respect to membrane normal has only faint effects on structural membrane properties, and even the lateral pressure profiles of model membranes with CHOL or DHE are almost identical. These results suggest that the mechanical/elastic effects of DHE on the function of mechanically sensitive membrane proteins are not substantially different from those of CHOL. Our study highlights similar dynamical behavior of CHOL and DHE, which implies that DHE can mimic CHOL in processes with free energies close to the thermal energy.