The osmotic shrinkage of giant unilamellar dioleoylphosphatidylglycerol (DOPG) vesicles in a hypertonic osmotic solution is investigated. The volume reduction for given membrane area leads to a vesiculation of the bilayer into the interior of the giant. The size of the daughter vesicles that appear inside the giant is uniform and an increasing function of the cholesterol content, but independent of the osmotic gradient applied. The radius of the daughter vesicles increases from 0.2 μm to 3.0 μm when the cholesterol content is changed from 0 to 40%. It is argued that the size of the daughter vesicles is regulated by the membrane persistence length, which is an exponential function of the mean bending modulus. From the kinetics of shrinkage it follows that approximately 14% of the daughter vesicles remain attached to the mother giant. This is in reasonable agreement with osmotic swelling experiments which show that approximately 11% of the daughter vesicles is available for area expansion.