Despite clinical evidence of the cholesterol-lowering effects of phytosterols, the exact mechanisms involved are still unclear. Displacement of cholesterol by phytosterols from mixed micelles, which is due to their greater hydrophobicity, is one of the hypotheses for the lumenal effects contributing to the reduction of intestinal cholesterol absorption. In this study a dynamic in vitro lipolysis method was used to examine the solubilization behavior of cholesterol and/or phytosterols during lipolysis to probe the efficacy of cholesterol displacement from mixed micelles by phytosterols. The effects of lipid chain length on sterol solubilization were studied by using microcrystalline suspensions containing 17% phytosterol or cholesterol, formulated in long-chain TG (LCT) and medium-chain TG (MCT). When digesting cholesterol-suspended in LCT, the entire cholesterol dose was incorporated into the micellar phase. For the cholesterol formulation suspended in MCT, 50.3% of the initial dose was recovered in the micelles. Under the respective conditions, we observed lower solubilization of phytosterols than of cholesterol (roughly fourfold). Only 25% of the initial phytosterol dose was solubilized from suspensions formulated with LCT, and 13% was solubilized from MCT formulations. Co-administration of phytosterol and cholesterol suspensions showed a significant reduction of cholesterol solubilization, particularly when dosed in MCT, with approximately 25% of the cholesterol dose solubilized. Insignificant amounts of cholesterol were displaced by phytosterols when cholesterol was presolubilized in the mixed micelles. The results show that, compared with LCT, mixed micelles containing MCT lipolysis products have a reduced solubilizing capacity for cholesterol, which adds to the effectiveness of the phytosterols in displacing cholesterol. This suggests potential benefits of using medium chain length lipids in cholesterol-lowering phytosterol products.