The critical roles of apolipoprotein E (apoE) in regulating plasma lipid and lipoprotein levels have been extensively studied for over 2 decades. However, an understanding of the roles of apoE in the central nervous system (CNS) is less certain. This review will summarize the available experimental results on the role of apoE in CNS lipid homeostasis with respect to its modulation of sulfatide trafficking, alteration of CNS cholesterol homeostasis and apoE-induced changes in phospholipid molecular species in specialized subcellular membrane fractions. The results indicate that apoE mediates sulfatide trafficking and metabolism in the CNS. Moreover, although apoE does not affect the cholesterol mass content or the phospholipid mass levels and composition in the CNS as a whole, apoE modulates cholesterol and phospholipid homeostasis in selective subcellular membrane compartments. Through elucidating the roles of apoE in CNS lipid metabolism, new insights into overall functions of apoE in neurobiology can be accrued ultimately, leading to an increased understanding of CNS lipid metabolism and the identification of novel therapeutic targets for CNS diseases.