The γ-aminobutyric acid (GABA) type A receptor (GABAR), a GABA activated pentameric chloride channel, mediates fast inhibitory neurotransmission in the brain. The lipid environment is critical for GABAR function. How lipids regulate the channel in the cell membrane is not fully understood. Here we employed super resolution imaging of lipids to demonstrate that the agonist GABA induces a rapid and reversible membrane translocation of GABAR to phosphatidylinositol 4,5-bisphosphate (PIP) clusters in mouse primary cortical neurons. This translocation relies on nanoscopic separation of PIP clusters and lipid rafts (cholesterol-dependent ganglioside clusters). In a resting state, the GABAR associates with lipid rafts and this colocalization is enhanced by uptake of astrocytic secretions. These astrocytic secretions delay desensitization and enhance maximum current. In an Alzheimer's Disease (AD) mouse model with high brain cholesterol, GABAR shifts into lipid rafts. Our findings suggest cholesterol is a signaling molecule and astrocytes regulates GABARs in neurons by secreting cholesterol. The findings have implications for treating mood disorders and AD associated with altered brain lipids.