AbstractCholesterol is an essential molecule for life. It is a component of the cell membrane, and it is a precursor molecule for bile acids, vitamin D and steroid hormones. Cholesterol is actively metabolized, but the impact of endogenous cholesterol metabolites on immune function, especially in the intestine, is poorly understood. In this review, I focus on oxysterols, hydroxylated forms of cholesterol, and their specialized functions in intestinal immunity. Oxysterols act through various intracellular and extracellular receptors and serve as key metabolic signals, coordinating immune activity and inflammation. Our recent work has identified an unexpected link between cholesterol metabolism, innate lymphoid cell function and intestinal homeostasis. We discovered that oxysterol sensing through the G protein‐coupled receptor 183 (GPR183) directs the migration of innate lymphoid cells, which is essential for the formation of lymphoid tissue in the colon. Moreover, we found that the interaction of GPR183 with oxysterols regulates intestinal inflammation. I will discuss the therapeutic potential of oxysterols and future possibilities of treating inflammatory bowel disease through the modulation of cholesterol metabolism.