Gene therapy has been effective in altering gene and protein expression that is at the root of diseases including AIDS, Alzheimer’s, and various forms of cancer. In order to make gene therapy viable and efficient, the process relies on a safe and reliable vector to deliver DNA. Synthetic vectors that include cationic lipid complexes are a safer and more versatile alternative to traditional viral vectors. Therefore, optimizing an ideal liposome for these complexes directs our attention to the parameters that affect transfection efficiency, primarily membrane charge density, the nanostructure of the complex, and the effect of cholesterol on the vector’s efficiency. Although cholesterol is known to increase transfection efficiency in some lipid systems, there are many properties of the lipid that are not understood. Using a thin-film hydration technique, we are able to fabricate liposomes with differing cholesterol content and charge density. Polarized optical microscopy is then used to investigate the phase separation of cholesterol crystals in liposomes. We then investigate the biological effect of these crystals on transfection using gene expression assays. Our work has shown that the cholesterol phase separation results in a non-monotonic relationship between cholesterol content and transfection efficiency. The understanding of this relationship is vital to the development of an effective drug carrier and the future of gene therapy overall.