Epidermal growth factor receptor (EGFR) is overexpressed in many cancer types including ∼30% of breast cancers. Several small molecule tyrosine kinase inhibitors (TKIs) targeting EGFR have shown clinical efficacy in lung and colon cancers, but no benefit has been noted in breast cancer. Thirteen EGFR expressing breast cancer cell lines were analyzed for response to EGFR TKIs. Seven were found to be EGFR TKI resistant; while shRNA knockdown of EGFR determined that four of these cell lines retained the requirement of EGFR protein expression for growth. Interestingly, EGFR localized to plasma membrane lipid rafts in all four of these EGFR TKI‐resistant cell lines, as determined by biochemical raft isolation and immunofluorescence. When lipid rafts were depleted of cholesterol using lovastatin, all four cell lines were sensitized to EGFR TKIs. In fact, the effects of the cholesterol biosynthesis inhibitors and gefitinib were synergistic. While gefitinib effectively abrogated phosphorylation of Akt‐ and mitogen‐activated protein kinase in an EGFR TKI‐sensitive cell line, phosphorylation of Akt persisted in two EGFR TKI‐resistant cell lines, however, this phosphorylation was abrogated by lovastatin treatment. Thus, we have shown that lipid raft localization of EGFR correlates with resistance to EGFR TKI‐induced growth inhibition and pharmacological depletion of cholesterol from lipid rafts decreases this resistance in breast cancer cell lines. Furthermore, we have presented evidence to suggest that when EGFR localizes to lipid rafts, these rafts provide a platform to facilitate activation of Akt signaling in the absence of EGFR kinase activity. J. Cell. Physiol. 226: 2316–2328, 2011. © 2010 Wiley‐Liss, Inc.