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Background & Aims Hepatic encephalopathy is a serious neurologic complication of acute and chronic liver diseases. We previously showed that aberrant bile acid signaling contributes to the development of hepatic encephalopathy via farnesoid X receptor (FXR)-mediated mechanisms in neurons. In the brain, a novel alternative bile acid synthesis pathway, catalyzed by cytochrome p450 46A1 (Cyp46A1), is the primary mechanism by which the brain regulates cholesterol homeostasis. The aim of this study was to determine if FXR activation in the brain altered cholesterol homeostasis during hepatic encephalopathy. Methods Cyp7A1-/- mice or C57Bl/6 mice pretreated with central infusion of FXR vivo morpholino, 2-hydroxypropyl-β-cyclodextrin, or fed a cholestyramine-supplemented diet were injected with azoxymethane (AOM). Cognitive and neuromuscular impairment as well as liver damage and expression of Cyp46A1 were assessed using standard techniques. The subsequent cholesterol content in the frontal cortex was measured using commercially available kits and by Filipin III and Nile Red staining. Results There was an increase in membrane-bound and intracellular cholesterol in the cortex of mice treated with AOM that was associated with decreased Cyp46A1 expression. Strategies to inhibit FXR signaling prevented the down-regulation of Cyp46A1 and the accumulation of cholesterol. Treatment of mice with 2-hydroxypropyl-β-cyclodextrin attenuated the AOM-induced cholesterol accumulation in the brain and the cognitive and neuromuscular deficits without altering the underlying liver pathology. Conclusions During hepatic encephalopathy, FXR signaling increases brain cholesterol and contributes to neurologic decline. Targeting cholesterol accumulation in the brain may be a possible therapeutic target for the management of hepatic encephalopathy.