Niemann-Pick disease type C2 (NP-C2) is a fatal hereditary disease characterized by accumulation of low-density lipoprotein-derived cholesterol in lysosomes. Here we report the 1.7-A resolution crystal structure of the cholesterol-binding protein deficient in this disease, NPC2, and the characterization of its ligand binding properties. Human NPC2 binds the cholesterol analog dehydroergosterol with submicromolar affinity at both acidic and neutral pH. NPC2 has an Ig-like fold stabilized by three disulfide bonds. The structure of the bovine protein reveals a loosely packed region penetrating from the surface into the hydrophobic core that forms adjacent small cavities with a total volume of approximately 160 A(3). We propose that this region represents the incipient cholesterol-binding site that dilates to accommodate an approximately 740-A(3) cholesterol molecule.