Apolipoprotein E is synthesized and secreted by astrocytes in the hippocampus following lesions of the entorhinal cortex. It was proposed that apolipoprotein E, by analogy to its role in cholesterol transport in circulation, could be involved in the salvage and reutilization of non-esterified cholesterol released during terminal breakdown. The salvaged cholesterol could then be transported to neurons by apolipoprotein E-complexes and taken up via the apolipoprotein E/apolipoprotein B (low-density lipoprotein) receptor. To test this hypothesis, we have examined low-density lipoprotein receptor binding in brain sections of rats undergoing hippocampal reinnervation. The number of neuronal cells labelled by fluorescent Dil-low-density lipoprotein as well as the density of [125I]low-density lipoprotein binding sites in the dentate gyrus were found to increase in parallel with the extent of cholinergic reinnervation occurring in the deafferented hippocampus. In contrast, hippocampal cholesterol synthesis fell by more than 60% at eight days post-lesion, but eventually returned to control levels at 30 days post-lesion. The transient loss of cholesterol synthesis coincided with a peak in hippocampal apolipoprotein E expression. A concomitant accumulation of sudanophilic lipids (cholesterol esters and phospholipids) was detected in the outer molecular layer of the dentate gyrus and in the hilar region. The present findings suggest that non-esterified cholesterol released during terminal breakdown is esterified, transported via the apolipoprotein E transport system to neurons undergoing reinnervation, and take-up through the low-density lipoprotein receptor pathway where it is presumably used as a precursor molecule for the synthesis of new synapses and terminals.