Recent evidence indicates that apolipoprotein E (ApoE) plays a central role in the hippocampal response to injury. The co-ordinated expression of ApoE and its receptor, the ApoE/ApoB [low density lipoprotein (LDL)] receptor, appears to regulate the transport of cholesterol and phospholipids during the early and intermediate phases of the reinnervation process. During dendritic remodeling and synaptogenesis, neurons progressively repress the synthesis of cholesterol in favor of cholesterol internalization through the ApoE/LDL receptor pathway. The discovery that the epsilon 4 allele is strongly linked to both sporadic and familial late-onset Alzheimer's disease (AD) raises the possibility that a dysfunction of the lipid-transport system associated with compensatory sprouting and synaptic remodeling could be central to the AD process. The role of ApoE in the CNS is particularly important in relation to the function of the cholinergic system, which relies to a certain extent on the integrity of phospholipid homeostasis in neurons. Recent evidence suggests that the epsilon 4 allele has a direct impact on cholinergic function in AD.