Hypercholesterolemia is a risk factor for neurodegenerative diseases, but how high blood cholesterol levels are linked to neurodegeneration is still unknown. Here, we show that an excess of the blood-brain barrier permeable cholesterol metabolite 27-hydroxycholesterol (27-OH) impairs neuronal morphology and reduces hippocampal spine density and the levels of the postsynaptic protein PSD95. Dendritic spines are the main postsynaptic elements of excitatory synapses and are crucial structures for memory and cognition. Furthermore, PSD95 has an essential function for synaptic maintenance and plasticity. PSD95 synthesis is controlled by the REST-miR124a-PTBP1 axis. Here, we report that high levels of 27-OH induce REST-miR124a-PTBP1 axis dysregulation in a possible RxRγ-dependent manner, suggesting that 27-OH reduces PSD95 levels through this mechanism. Our results reveal a possible molecular link between hypercholesterolemia and neurodegeneration. We discuss the possibility that reduction of 27-OH levels could be a useful strategy for preventing memory and cognitive decline in neurodegenerative disorders.