Liver X receptors (LXRs) are nuclear receptors involved in the regulation of lipid metabolism and inflammatory responses in the central nervous system. Defects in cholesterol homeostasis contribute to the pathogenesis of neurodegenerative diseases, such as Alzheimer's disease, Parkinson's disease, multiple sclerosis, and Huntington's disease. Inflammatory responses could enhance the neurodegenerative process or act independently. The natural and synthetic LXR agonists induce the transcriptional activity of LXR target genes, thus attenuate the imbalance of cholesterol metabolism and overactivation of microglia and astrocytes in inflammation and are widely used in a variety of neurodegenerative diseases animal models. By developing more specific, potent, penetrable, and functional LXR agonist may lead to a better curative effect for neurodegenerative diseases and avoidance of potentially deleterious side effects. Here, we focus on recent advances in our understanding of the role of LXRs and their agonists in cholesterol homeostasis, inflammation, and the potential therapeutic effects in neurodegenerative diseases.