Fish consumption is well known to provide health benefits in both experimental animals and human subjects. Numerous studies have demonstrated the beneficial effects of various protein hydrolysates on lipid metabolism. In this context, this study examined the effect of fish protein hydrolysates (FPH) on cholesterol metabolism compared with the effect of casein. FPHs were prepared from Alaska pollock meat using papain as a protease. Male Wistar rats were divided into the following four dietary groups of seven rats each: either casein (20%) or FPH (10%) + casein (10%), with or without 0.5% cholesterol and 0.1% sodium cholate. Serum and liver lipid levels, fecal cholesterol and bile acid excretions, and the hepatic expression of genes encoding proteins involved in cholesterol homeostasis were examined. In rats fed the FPH diets compared with casein diets with or without cholesterol and sodium cholate, the indexes of cholesterol metabolism-namely, serum cholesterol, triglyceride, and low-density lipoprotein-cholesterol levels-were significantly lower, whereas fecal cholesterol and bile acid excretions were higher. Rats fed the FPH diets compared with casein with cholesterol exhibited a lower liver cholesterol level via an increased liver cholesterol 7α-hydroxylase (CYP7A1) expression level. This study demonstrates that the intake of FPH has hypocholesterolemic effects through the enhancement of fecal cholesterol and bile acid excretions and CYP7A1 expression levels. Therefore, fish peptides prepared by papain digestion might provide health benefits by decreasing the cholesterol content in the blood, which would contribute to the prevention of circulatory system diseases such as arteriosclerosis.