The oxysterol 25-hydroxycholesterol is a widely used compound displaying an array of pharmacological actions in in vitro systems and cell based experimental systems. In spite of the frequent use of this compound over the last few decades and a large number of studies in vitro and in vivo, its mechanism of formation in vivo is still not well understood. Cholesterol autoxidation does not seem to be an important contributor to in vivo formation of 25-hydroxycholesterol. A number of different cytochrome P450 enzymes such as CYP27A1 and CYP3A4 have been reported to catalyze the conversion of cholesterol to 25-hydroxycholesterol in vitro, but the importance of these reactions in vivo remains unclear. The dioxygenase enzyme cholesterol 25-hydroxylase has been shown to generate 25-hydroxycholesterol, but in cholesterol 25-hydroxylase knockout mice there are still significant levels of 25-hydroxycholesterol in several tissues. This suggests that cholesterol 25-hydroxylase is not the sole producer of 25-hydroxycholesterol. The relative importance of different mechanisms of formation of 25-hydroxycholesterol in vivo have still to be elucidated. The maintenance of cholesterol homeostasis is of great importance to supply tissues with the appropriate amount of cholesterol and prevent accumulation that may affect health. Numerous articles mention 25-hydroxycholesterol as an important regulator of cholesterol metabolism. However, mice with a disruption of the cholesterol 25-hydroxylase gene regulate cholesterol metabolism normally and patients with highly elevated levels of 25-hydroxycholesterol also display normal cholesterol and bile acid levels. These reports challenge the hypothesis that 25-hydroxycholesterol is an important regulator of cholesterol metabolism. Recent reports suggest that 25-hydroxycholesterol and one of its metabolites may have functions in regulation of humoral immunity. Thus, 25-hydroxycholesterol may be more important as a regulator of immunity than as a regulator of cholesterol metabolism.