The implication that cholesterol plays an essential role in the pathogenesis of Alzheimer's disease (AD) is based on the 1993 finding that the presence of apolipoprotein E (apoE) allele epsilon4 is a strong risk factor for developing AD. Since apoE is a regulator of lipid metabolism, it is reasonable to assume that lipids such as cholesterol are involved in the pathogenesis of AD. Recent epidemiological and biochemical studies have strengthened this assumption by demonstrating the association between cholesterol and AD, and by proving that the cellular cholesterol level regulates synthesis of amyloid beta-protein (Abeta). Yet several studies have demonstrated that oligomeric Abeta affects the cellular cholesterol level, which in turn has a variety of effects on AD-related pathologies, including modulation of tau phosphorylation, synapse formation and maintenance of its function, and the neurodegenerative process. All these findings suggest that the involvement of cholesterol in the pathogenesis of AD is dualistic-it is involved in Abeta generation and in the amyloid cascade, leading to disruption of synaptic plasticity, promotion of tau phosphorylation, and eventual neurodegeneration. This review article describes recent findings that may lead to the development of a strategy for AD prevention by decreasing the cellular cholesterol level, and also focuses on the impact of Abeta on cholesterol metabolism in AD and mild cognitive impairment (MCI), which may result in promotion of the amyloid cascade at later stages of the AD process.