Desmosterol is an immediate precursor of cholesterol in the Bloch pathway of sterol synthesis and an abundant membrane lipid in specific cell types. The significance of the difference between the two sterols, an additional double bond at position C24 in the tail of desmosterol, is not known. Here, we provide evidence that the biophysical and functional characteristics of the two sterols differ and that this is because the double bond at C24 significantly weakens the sterol ordering potential. In model membranes, desmosterol was significantly weaker than cholesterol in promoting the formation or stability of ordered domains, and in mammalian cell membranes, desmosterol associated less avidly than cholesterol with detergent-resistant membranes. Atomic scale molecular dynamics simulations showed that the double bond gives rise to additional stress in the tail, creating a rigid structure between C24 and C27 and favoring tilting of desmosterol distinct from cholesterol. Functional effects of desmosterol in cell membranes were assessed upon acutely exchanging ~70% of cholesterol to desmosterol. This led to impaired raft-dependent signaling via the insulin receptor, whereas non-raft-dependent protein secretion was not affected. We suggest that the choice of cholesterol synthesis route may provide a physiological mechanism to modulate raft-dependent functions in cells.