The objective of this article was to review existing literature concerning the effects and mechanisms of action of fermented dairy products on serum cholesterol concentrations. Although not without exception, existing evidence from animal and human studies suggests a moderate cholesterol-lowering action of fermented dairy products. Mechanistically, fermented milk has been shown to cause an increase in human gut bacterial content. These bacteria, once resident in the large intestine, are believed to ferment food-derived indigestible carbohydrates. Such fermentation causes increased production of short-chain fatty acids, which decreases circulatory cholesterol concentrations either by inhibiting hepatic cholesterol synthesis or by redistributing cholesterol from plasma to the liver. Furthermore, increased bacterial activity in the large intestine results in enhanced bile acid deconjugation. Deconjugated bile acids are not well absorbed by the gut mucosa and are excreted. Consequently, cholesterol, being a precursor of bile acids, is utilized to a greater extent for de novo bile acid synthesis. These actions combined are proposed as contributing mechanisms to the association of fermented milk consumption with decreased circulating cholesterol concentrations.