Duplication of PLP1 (proteolipid protein gene 1) and the subsequent overexpression of the myelin protein PLP (also known as DM20) in oligodendrocytes is the most frequent cause of Pelizaeus-Merzbacher disease (PMD), a fatal leukodystrophy without therapeutic options. PLP binds cholesterol and is contained within membrane lipid raft microdomains. Cholesterol availability is the rate-limiting factor of central nervous system myelin synthesis. Transgenic mice with extra copies of the Plp1 gene are accurate models of PMD. Dysmyelination followed by demyelination, secondary inflammation and axon damage contribute to the severe motor impairment in these mice. The finding that in Plp1-transgenic oligodendrocytes, PLP and cholesterol accumulate in late endosomes and lysosomes (endo/lysosomes), prompted us to further investigate the role of cholesterol in PMD. Here we show that cholesterol itself promotes normal PLP trafficking and that dietary cholesterol influences PMD pathology. In a preclinical trial, PMD mice were fed a cholesterol-enriched diet. This restored oligodendrocyte numbers and ameliorated intracellular PLP accumulation. Moreover, myelin content increased, inflammation and gliosis were reduced and motor defects improved. Even after onset of clinical symptoms, cholesterol treatment prevented disease progression. Dietary cholesterol did not reduce Plp1 overexpression but facilitated incorporation of PLP into myelin membranes. These findings may have implications for therapeutic interventions in patients with PMD.