High cholesterol levels are a major risk factor for cardiovascular disease, but their role in dementia and cognitive decline is less clear. This review highlights current knowledge on the role of cholesterol in late-life cognitive function, cognitive decline, and dementia. When measured in midlife, high cholesterol levels associate with an increased risk of late-life dementia and cognitive decline. However, when measured in late-life, high cholesterol levels show no association with cognitive function, or even show an inverse relation. Although statin treatment has been shown to associate with a lower risk of dementia and cognitive decline in observational studies, randomized controlled trials show no beneficial effect of statin treatment on late-life cognitive function. Lowering cholesterol levels may impair brain function, since cholesterol is essential for synapse formation and maturation and plays an important role in the regulation of signal transduction through its function as a component of the cell membrane. However, membrane cholesterol also plays a role in the formation and aggregation of amyloid-β. Factors that influence cholesterol metabolism, such as dietary intake, are shown to play a role in late-life cognitive function and the risk of dementia. In conclusion, cholesterol associates with late-life cognitive function, but the association is strongly age-dependent. There is no evidence that treatment with statins in late-life has a beneficial effect on cognitive function.