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Niemann-Pick C1–like 1 (NPC1L1) is required for cholesterol absorption. Intestinal NPC1L1 appears to be a target of ezetimibe, a cholesterol absorption inhibitor that effectively lowers plasma LDL-cholesterol in humans. However, human liver also expresses NPC1L1. Hepatic function of NPC1L1 was previously unknown, but we recently discovered that NPC1L1 localizes to the canalicular membrane of primate hepatocytes and that NPC1L1 facilitates cholesterol uptake in hepatoma cells. Based upon these findings, we hypothesized that hepatic NPC1L1 allows the retention of biliary cholesterol by hepatocytes and that ezetimibe disrupts hepatic function of NPC1L1. To test this hypothesis, transgenic mice expressing human NPC1L1 in hepatocytes (L1-Tg mice) were created. Hepatic overexpression of NPC1L1 resulted in a 10- to 20-fold decrease in biliary cholesterol concentration, but not phospholipid and bile acid concentrations. This decrease was associated with a 30%–60% increase in plasma cholesterol, mainly because of the accumulation of apoE-rich HDL. Biliary and plasma cholesterol concentrations in these animals were virtually returned to normal with ezetimibe treatment. These findings suggest that in humans, ezetimibe may reduce plasma cholesterol by inhibiting NPC1L1 function in both intestine and liver, and hepatic NPC1L1 may have evolved to protect the body from excessive biliary loss of cholesterol.