Transport of cholesterol derived from hydrolysis of lipoprotein associated cholesteryl esters out of late endosomes depends critically on the function of the Niemann Pick C1 (NPC1) and C2 (NPC2) proteins. Both proteins bind cholesterol but also various other sterols and both with strongly varying affinity. The molecular mechanisms underlying this multiligand specificity are not known. On the basis of the crystal structure of NPC2, we have here investigated structural details of NPC2-sterol interactions using molecular mechanics Poisson-Boltzmann surface area (MM-PBSA) calculations. We found that an aliphatic side chain in the sterol ligand results in strong binding to NPC2, while side-chain oxidized sterols gave weaker binding. Estradiol and the hydrophobic amine U18666A had the lowest affinity of all tested ligands and at the same time showed the highest flexibility within the NPC2 binding pocket. The binding affinity of all ligands correlated highly with their calculated partitioning coefficient (logP) between octanol/water phases and with the potential of sterols to stabilize the protein backbone. From molecular dynamics simulations, we suggest a general mechanism for NPC2 mediated sterol transfer, in which Phe66, Val96, and Tyr100 act as reversible gate keepers. These residues stabilize the sterol in the binding pose via π-π stacking but move transiently apart during sterol release. A computational mutation analysis revealed that the binding of various ligands depends critically on the same specific amino acid residues within the binding pocket providing shape complementary to sterols, but also on residues in distal regions of the protein.