Soluble epoxide hydrolase (sEH) is becoming an attractive therapeutic target in cardiovascular disease. Recently, known human sEH polymorphisms were associated with elevated plasma cholesterol and atherosclerosis. In this study we evaluated the potential role of sEH in regulating cholesterol metabolism through modulating the levels of fatty acid epoxide substrates and/or their corresponding diol products known to activate peroxisome proliferator activated receptors (PPARs). We measured changes in cholesterol levels induced by expressing sEH proteins in mammalian cell lines and in response to treatment with various sEH-related compounds. Our results indicate that sEH has a cholesterol lowering effect that is mediated at least in part through its C-terminal hydrolase activity. In addition, several fatty acid epoxides and their corresponding diols showed cholesterol lowering effects in the current study. In conclusion, this study provides evidence that fatty acid epoxides and diols are endogenous cholesterol lowering molecules and that sEH may be involved in cholesterol regulation by modulating their levels.