We upgrade the study of the physical reach of a Neutrino Factory consideringthe possibility to distinguish a three (active) neutrino oscillation scenariofrom the scenario in which a light sterile neutrino is also present. Thedistinction is easily performed in the so--called 2+2 scheme, but also in themore problematic 3+1 scheme it can be attained in some regions of the parameterspace. We also discuss the CP violating phase determination, showing that theeffects of a large phase in the three--neutrino theory cannot be reproduced ina four--neutrino, CP conserving, model.