Cholesterol is essential for brain function and structure, however altered cholesterol metabolism and transport are hallmarks of multiple neurodegenerative conditions, including Alzheimer's disease (AD). The well-established link between apolipoprotein E (APOE) genotype and increased AD risk highlights the importance of cholesterol and lipid transport in AD etiology. Whereas more is known about the regulation and dysregulation of cholesterol metabolism and transport in neurons and astrocytes, less is known about how microglia, the immune cells of the brain, handle cholesterol, and the subsequent implications for the ability of microglia to perform their essential functions. Evidence is emerging that a high-cholesterol environment, particularly in the context of defects in the ability to transport cholesterol (e.g., expression of the high-risk APOE4 isoform), can lead to chronic activation, increased inflammatory signaling, and reduced phagocytic capacity, which have been associated with AD pathology. In this narrative review we describe how cholesterol regulates microglia phenotype and function, and discuss what is known about the effects of statins on microglia, as well as highlighting areas of future research to advance knowledge that can lead to the development of novel therapies for the prevention and treatment of AD.