The nonsteroidal anti-inflammatory drug indomethacin exhibits diverse biological effects, many of which have no clear molecular mechanism. Membrane-bound receptors and enzymes are sensitive to their phospholipid microenvironment. Amphipathic indomethacin could therefore potentially modulate cell signaling by changing membrane properties. Here we examined the effect of indomethacin on membrane lateral heterogeneity. Fluorescence lifetime imaging of cells expressing lipid-anchored probes revealed that treatment of BHK cells with therapeutic levels of indomethacin enhances cholesterol-dependent nanoclustering, but not cholesterol-independent nanoclustering. Immuno-electron microscopy and quantitative spatial mapping of intact plasma membrane sheets similarly showed a selective effect of indomethacin on promoting cholesterol-dependent, but not cholesterol-independent, nanoclustering. To further evaluate the biophysical effects of indomethacin, we measured fluorescence polarization of the phase-sensitive probe Laurdan and FRET between phase-partitioning probes in model bilayers. Therapeutic levels of indomethacin enhanced phase separation in DPPC/DOPC/Chol (1:1:1) and DPPC/Chol membranes in a temperature-dependent manner, but had minimal effect on the phase behavior of pure DOPC at any temperature. Taken together, the imaging results on intact epithelial cells and the biophysical assays of model membranes suggest that indomethacin can enhance phase separation and stabilize cholesterol-dependent nanoclusters in biological membranes. These effects on membrane lateral heterogeneity may have significant consequences for cell signaling cascades that are assembled on the plasma membrane.