Cholesterol metabolism has been implicated in the pathogenesis of several neurodegenerative diseases, including the abnormal accumulation of amyloid-beta, one of the pathological hallmarks of Alzheimer disease (AD). Acyl-CoA:cholesterol acyltransferases (ACAT1 and ACAT2) are two enzymes that convert free cholesterol to cholesteryl esters. ACAT inhibitors have recently emerged as promising drug candidates for AD therapy. However, how ACAT inhibitors act in the brain has so far remained unclear. Here we show that ACAT1 is the major functional isoenzyme in the mouse brain. ACAT1 gene ablation (A1-) in triple transgenic (i.e., 3XTg-AD) mice leads to more than 60% reduction in full-length human APPswe as well as its proteolytic fragments, and ameliorates cognitive deficits. At 4 months of age, A1- causes a 32% content increase in 24-hydroxycholesterol (24SOH), the major oxysterol in the brain. It also causes a 65% protein content decrease in HMG-CoA reductase (HMGR) and a 28% decrease in sterol synthesis rate in AD mouse brains. In hippocampal neurons, A1- causes an increase in the 24SOH synthesis rate; treating hippocampal neuronal cells with 24SOH causes rapid declines in hAPP and in HMGR protein levels. A model is provided to explain our findings: in neurons, A1- causes increases in cholesterol and 24SOH contents in the endoplasmic reticulum, which cause reductions in hAPP and HMGR protein contents and lead to amelioration of amyloid pathology. Our study supports the potential of ACAT1 as a therapeutic target for treating certain forms of AD.