Niemann-Pick type-C (NPC) disease is characterized by a progressive loss of neurons and an accumulation of unesterified cholesterol within the endocytic pathway. Unlike other tissues, however, NPC1-deficient brains do not accumulate cholesterol but whether or not NPC1-deficient neurons accumulate cholesterol is not clear. Therefore, as most studies on cholesterol homeostasis in NPC1-deficient cells have been performed in fibroblasts we have investigated cholesterol homeostasis in cultured murine sympathetic neurons lacking functional NPC1. These neurons did not display obvious abnormalities in growth or morphology and appeared to respond normally to nerve growth factor. Filipin staining revealed numerous cholesterol-filled endosomes/lysosomes in NPC1-deficient neurons and the mass of cholesterol in cell bodies was greater than in wild-type neurons. Surprisingly, however, the cholesterol content of NPC1-deficient and wild-type neurons as a whole was the same. This apparent paradox was resolved when the cholesterol content of NPC1-deficient distal axons was found to be less than of wild-type axons. Cholesterol sequestration in cell bodies did not depend on exogenously supplied cholesterol since the cholesterol accumulated before birth and did not disperse when neurons were cultured without exogenous cholesterol. The altered cholesterol distribution between cell bodies and axons suggests that transport of cholesterol, particularly that synthesized endogenously, from cell bodies to distal axons is impaired in NPC1-deficient neurons.