Since the discovery of the significance of the cholesterol-carrying apolipoprotein E and cholesterolaemia as major risk factors for Alzheimer's Disease (AD) there has been a mounting interest in the role of this lipid as a possible pathogenic agent. In this review we analyse the current evidence linking cholesterol metabolism and regulation in the CNS with the known mechanisms underlying the development of Alzheimer's Disease. Cholesterol is known to affect amyloid-beta generation and toxicity, although it must be considered that the results studies using the statin class of drugs to lower plasma cholesterol may be affected by other effects associated with these drugs. Finally, we report some of our results pointing at the interplay between neurons and astrocytes and NADPH oxidase activation as a new candidate mechanism linking cholesterol and AD pathology.