Aberrant cholesterol metabolism has been implicated in Alzheimer disease (AD) and other neurological disorders. Oxysterols and other cholesterol oxidation products are effective ligands of liver X activated receptor (LXR) nuclear receptors, major regulators of genes subserving cholesterol homeostasis. LXR receptors act as molecular sensors of cellular cholesterol concentrations and effectors of tissue cholesterol reduction. Following their interaction with oxysterols, activation of LXRs induces the expression of ATP-binding cassette, sub-family A member 1, a pivotal modulator of cholesterol efflux. The relative solubility of oxysterols facilitates lipid flux among brain compartments and egress across the blood-brain barrier. Oxysterol-mediated LXR activation induces local apoE biosynthesis (predominantly in astrocytes) further enhancing cholesterol re-distribution and removal. Activated LXRs invoke additional neuroprotective mechanisms, including induction of genes governing bile acid synthesis (sterol elimination pathway), apolipoprotein elaboration, and amyloid precursor protein processing. The latter translates into attenuated beta-amyloid production that may ameliorate amyloidogenic neurotoxicity in AD brain. Stress-induced up-regulation of the heme-degrading enzyme, heme oxygenase-1 in AD-affected astroglia may impact central lipid homeostasis by promoting the oxidation of cholesterol to a host of oxysterol intermediates. Synthetic oxysterol-mimetic drugs that activate LXR receptors within the CNS may provide novel therapeutics for management of AD and other neurological afflictions characterized by deranged tissue cholesterol homeostasis.