The dependence of lipid lateral diffusion on temperature, cholesterol, and water contents has been studied in oriented bilayers in three phosphatidylcholine lipid systems and one sphingomyelin system. The lateral diffusion of lipids is found to be reduced both by the addition of cholesterol and by decreasing the water content. This reduction can be ascribed to the increase in the ordering of the lipid acyl chains upon cholesterol addition and/or reduced water content. The dependence of the lateral diffusion coefficient on the water content is similar in both the liquid ordered and the liquid disordered phase, while the apparent activation energy for the diffusion process is larger in the liquid ordered phase. We also report an anomalous increase in the lipid diffusion upon small additions of cholesterol to bilayer systems at low water content and temperatures. The increased diffusion is tentatively explained by a reduction of lipid chain entanglements.