Neonatal encephalopathy (NE) results from impaired cerebral blood flow and oxygen delivery to the brain. The pathophysiology of NE is complex and our understanding of its underlying pathways continues to evolve. There is considerable evidence that cholesterol dysregulation is involved in several adult diseases, including traumatic brain injury, stroke, Huntington’s disease, and Parkinson’s disease. Although the research is less robust in pediatrics, there is emerging evidence that aberrations in cholesterol metabolism may also be involved in the pathophysiology of neonatal NE. This narrative review provides an overview of cholesterol metabolism in the brain along with several examples from the adult literature where pathologic alterations in cholesterol metabolism have been associated with inflammatory and ischemic brain injury. Using those data as a background, the review then discusses the current preclinical data supporting the involvement of cholesterol in the pathogenesis of NE as well as how brain-specific cholesterol metabolites may serve as serum biomarkers for brain injury. Lastly, we review the potential for using the cholesterol metabolic pathways as therapeutic targets. Further investigation of the shifts in cholesterol synthesis and metabolism after hypoxia-ischemia may prove vital in understanding NE pathophysiology as well as providing opportunities for rapid diagnosis and therapeutic interventions. IMPACT: This review summarizes emerging evidence that aberrations in cholesterol metabolism may be involved in the pathophysiology of NE. Using data from NE as well as analogous adult disease states, this article reviews the potential for using cholesterol pathways as targets for developing novel therapeutic interventions and using cholesterol metabolites as biomarkers for injury. When possible, gaps in the current literature were identified to aid in the development of future studies to further investigate the interactions between cholesterol pathways and NE.