Background. The management strategy to be adopted in pleural effusion depends on whether an effusion is a transudate or exudate. Objective. To evaluate the usefulness of pleural fluid cholesterol and/or total protein measurements for differentiating between exudates and transudates, and to compare it with Light's criteria. Methods. In this prospective study 60 patients with pleural effusion were included. Pleural fluid total protein, lactate dehydrogenase (LDH) and cholesterol as well as serum total protein and LDH levels along with other investigations were studied. Clinical classification of transudate or exudate was done on the basis of aetiology. Results. Based on clinical signs and symptoms, chest radiograph, other investigations and response to treatment, 49 of these effusions were classified as exudates and 11 as transudates. Using pleural fluid cholesterol levels at a cut-off point of greater than 60 mg/dL and/or total protein at a cut-off point of greater than 3 g/dL for distinguishing transudates and exudates, the sensitivity, specificity, positive predictive value (PPV) and negative predictive value (NPV), were 100 percent. Using Light's criteria for discriminating transudates and exudates, sensitivity, specificity, PPV and NPV were found to be 98%; 100%; 100% and 92%, respectively. The differences resulted from a mis-classification of one expected exudate as transudate by Light's criteria. Conclusion. Pleural fluid cholesterol and total protein are simple, cost-effective, and useful parameters in distinguishing pleural transudates from exudates, with the advantage of requiring only two laboratory determinations and no simultaneous blood sample, compared to the use of Light's criteria.