The fate of free cholesterol released after endocytosis of low-density lipoproteins remains obscure. Here we report that late endosomes have a pivotal role in intracellular cholesterol transport. We find that in the genetic disease Niemann–Pick type C (NPC), and in drug-treated cells that mimic NPC, cholesterol accumulates in late endosomes and sorting of the lysosomal enzyme receptor is impaired. Our results show that the characteristic network of lysobisphosphatidic acid-rich membranes contained within multivesicular late endosomes regulates cholesterol transport, presumably by acting as a collection and distribution device. The results also suggest that similar endosomal defects accompany the anti-phospholipid syndrome and NPC