Niemann-Pick type C (NPC) disease is a lysosomal storage disease in which endocytosed cholesterol becomes sequestered in late endosomes/lysosomes (LE/L) because of mutations in either the NPC1 or NPC2 gene. Mutations in either of these genes can impair the functions of the corresponding NPC1 or NPC2 proteins, and cause progressive neurodegeneration, as well as liver and lung disease. NPC1 is a polytopic protein of the LE/L limiting membrane whereas NPC2 is a soluble protein in the LE/L lumen. These two proteins act in tandem and promote the export of cholesterol from LE/L. Consequently, a defect in either NPC1 or NPC2 induces cholesterol accumulation in LE/L. In this review, we shall summarize the molecular mechanisms leading to NPC disease, particularly in the central nervous system. Recent exciting data on the mechanism by which the cholesterol-sequestering agent cyclodextrin can bypass the functions of NPC1 and NPC2 in LE/L, and mobilize cholesterol from LE/L, will be highlighted. Moreover, the possible use of cyclodextrin as a valuable therapeutic agent for treatment of NPC patients will be considered.