Myelin consists of tightly compacted membranes that form an insulating sheath around axons. The function of myelin for rapid saltatory nerve conduction is dependent on its unique composition, highly enriched in glycosphingolipids and cholesterol. Cholesterol emerged as the only integral myelin component that is essential and rate limiting for the development of CNS and PNS myelin. Experiments with conditional mouse mutants that lack cholesterol biosynthesis in oligodendrocytes revealed that only minimal changes of the CNS myelin lipid composition are tolerated. In Schwann cells of the PNS, protein trafficking and myelin compaction depend on cholesterol. In this review, the authors summarize the role of cholesterol in myelin biogenesis and myelin disease.