Cholesterol is eliminated from neurons by oxidization, which generates oxysterols. Cholesterol oxidation is mediated by the enzymes cholesterol 24-hydroxylase (CYP46A1) and cholesterol 27-hydroxylase (CYP27A1). Immunocytochemical studies show that CYP46A1 and CYP27A1 are expressed in neurons and some astrocytes in the normal brain, and CYP27A1 is present in oligodendrocytes. In Alzheimer's disease (AD), CYP46A1 shows prominent expression in astrocytes and around amyloid plaques, whereas CYP27A1 expression decreases in neurons and is not apparent around amyloid plaques but increases in oligodendrocytes. Although previous studies have examined the effects of synthetic oxysterols on the processing of amyloid precursor protein (APP), the actions of the naturally occurring oxysterols have yet to be examined. To understand the role of cholesterol oxidation in AD, we compared the effects of 24(S)- and 27-hydroxycholesterol on the processing of APP and analyzed the cell-specific expression patterns of the two cholesterol hydroxylases in the human brain. Both oxysterols inhibited production of Abeta in neurons, but 24(S)-hydroxycholesterol was approximately 1000-fold more potent than 27-hydroxycholesterol. The IC(50) of 24(S)-hydroxycholesterol for inhibiting Abeta secretion was approximately 1 nm. Both oxysterols induced ABCA1 expression with IC(50) values similar to that for inhibition of A beta secretion, suggesting the involvement of liver X receptor. Oxysterols also inhibited protein kinase C activity and APP secretion following stimulation of protein kinase C. The selective expression of CYP46A1 around neuritic plaques and the potent inhibition of APP processing in neurons by 24(S)-hydroxycholesterol suggests that CYP46A1 affects the pathophysiology of AD and provides insight into how polymorphisms in the CYP46A1 gene might influence the pathophysiology of this prevalent disease.