Alzheimer's disease (AD) is a progressive senile dementia characterized by deposition of a 4 kDa peptide of 39-42 residues known as amyloid beta-peptide (Abeta) in the form of senile plaques and the microtubule associated protein tau as paired helical filaments. Genetic studies have identified mutations in the Abeta precursor protein (APP) as the key triggers for the pathogenesis of AD. Other genes such as presenilins 1 and 2 (PS1/2) and apolipoprotein E (APOE) also play a critical role in increased Abeta deposition. Several biochemical and molecular studies using transfected cultured cells and transgenic animals point to mechanisms by which Abeta is generated and aggregated to trigger the neurodegeneration that may cause AD. Three important enzymes collectively known as 'secretases' participate in APP processing leading to the generation of either Abeta or non-amyloid proteins. However, the mechanisms of neurotoxicity of Abeta and the role of APP function in AD remain important unanswered questions. Although early studies recognized the loss of cholesterol and other lipids in the brain, these findings have been poorly connected with AD pathogenesis, despite the identification of the epsilon4 allele of APOE as a major risk factor in AD. The recent finding that cholesterol can modulate the yield of potentially toxic Abeta has boosted research on its role in AD. Consequently, several cholesterol-reducing drugs are currently being evaluated for the treatment of AD. The present review summarizes our current understanding of the relationship of AD pathogenesis with cholesterol, lipids and other genetic and environmental risk factors.