There is ample evidence from experimental models and human metabolic disorders indicating that cholesterol and sphingomyelin (SM) levels are coordinately regulated. Generally it has been observed that altering the cellular content of sphingomyelin or cholesterol results in corresponding changes in mass and/or synthesis of the other lipid. In the case of cholesterol synthesis and trafficking, SM regulates the capacity of membranes to absorb cholesterol and thereby controls sterol flux between the plasma membrane and regulatory pathways in the endoplasmic reticulum. This relationship exemplifies the importance of cholesterol/sphingolipid-rich domains in cholesterol homeostasis, as well as other aspects of cell signaling and transport. Evidence for regulation of sphingomyelin metabolism by cholesterol is less convincing and dependent on the model system under study. Sphingomyelin biosynthetic rates are not dramatically affected by alterations in cholesterol balance suggesting that sphingomyelin or its metabolites serve other indispensable functions in the cell. A notable exception is the robust and specific regulation of both SM and cholesterol synthesis by 25-hydroxycholesterol. This finding is reviewed in the context of the role of oxysterol binding protein and its putative role in cholesterol and SM trafficking between the plasma membrane and Golgi apparatus.