Familial Alzheimer’s disease (FAD)-associated presenilin 1 (PS1) serves as a catalytic subunit of γ-secretase complex, which mediates the proteolytic liberation of β-amyloid (Aβ) from β-amyloid precursor protein (APP). In addition to its proteolytic role, PS1 is involved in non-proteolytic functions such as protein trafficking and ion channel regulation. Furthermore, postmortem AD brains as well as AD patients showed dysregulation of cholesterol metabolism. Since cholesterol has been implicated in regulating Aβ production, we investigated whether the FAD PS1-associated cholesterol elevation could influence APP processing. We found that in CHO cells stably expressing FAD-associated PS1 ΔE9, total cholesterol levels are elevated compared to cells expressing wild-type PS1. We also found that localization of APP in cholesterol-enriched lipid rafts is substantially increased in the mutant cells. Reducing the cholesterol levels by either methyl-β-cyclodextrin or an inhibitor of CYP51, an enzyme mediating the elevated cholesterol in PS1 ΔE9-expressing cells, significantly reduced lipid raft-associated APP. In contrast, exogenous cholesterol increased lipid raft-associated APP. These data suggest that in the FAD PS1 ΔE9 cells, the elevated cellular cholesterol level contributes to the altered APP processing by increasing APP localized in lipid rafts.