NPC1L1, a recently identified relative of Niemann-Pick C1, was characterized to determine its subcellular location and potential function(s). NPC1L1 was highly expressed in HepG2 cells and localized in a subcellular vesicular compartment rich in the small GTPase Rab5. mRNA expression profiling revealed significant differences between mouse and man with highest expression found in human liver and significant expression in the small intestine. In contrast, liver expression in mouse was extremely low with mouse small intestine exhibiting the highest NPC1L1 expression. A mouse knock-out model of NPC1L1 was generated and revealed that mice lacking a functional NPC1L1 have multiple lipid transport defects. Surprisingly, lack of NPC1L1 exerts a protective effect against diet-induced hyperlipidemia. Further characterization of cell lines generated from wild-type and knock-out mice revealed that in contrast to wild-type cells, NPC1L1 cells exhibit aberrant plasma membrane uptake and subsequent transport of various lipids, including cholesterol and sphingolipids. Furthermore, lack of NPC1L1 activity causes a deregulation of caveolin transport and localization, suggesting that the observed lipid transport defects may be the indirect result of an inability of NPC1L1 null cells to properly target and/or regulate caveolin expression.