Many eukaryotes, pathogenic and free-living alike, encyst during their life cycle. How these various organisms sense their environment to determine when and where to differentiate is largely unknown. Our recent work on the intestinal parasite Giardia lamblia has demonstrated that intestinal bile and elevated pH deplete cholesterol rich lipid rafts from the parasite plasma membrane which upregulates cyclic adenosine monophosphate (cAMP) production and initiates encystation. I will present our recent work on the regulation of encystation in Giardia.