In traumatic brain injury (TBI), cellular loss from initial impact as well as secondary neurodegeneration leads to increased cholesterol and lipid debris at the site of injury. Cholesterol accumulation in the periphery can trigger inflammatory mechanisms while cholesterol clearance may be anti-inflammatory. Here we investigated whether TBI altered the regulation of cholesterol 24S-hydroxylase (Cyp46), an enzyme that converts cholesterol to the more hydrophilic 24S-hydroxycholesterol. We examined by Western blot and immunohistochemistry changes in Cyp46 expression following fluid percussion injury. Under normal conditions, most Cyp46 was present in neurons, with very little measurable in glia. Cyp46 levels were significantly increased at 7 days post-injury, and cell type specific analysis at 3 days post-injury showed a significant increase in levels of Cyp46 (84%) in microglia. Since 24-hydroxycholesterol induces activation of genes through the liver X receptor (LXR), we examined protein levels of ATP-binding cassette transporter A1 and apolipoprotein E, two LXR regulated cholesterol homeostasis proteins. Apolipoprotein E and ATP-binding cassette transporter A1 were increased at 7 days post-injury, indicating that increased LXR activity coincided with increased Cyp46 levels. We found that activation of primary rat microglia by LPS in vitro caused increased Cyp46 levels. These data suggest that increased microglial Cyp46 activity is part of a system for removal of damaged cell membranes post-injury, by conversion of cholesterol to 24-hydroxycholesterol and by activation of LXR-regulated gene transcription.