Diabetes mellitus is associated with a variety of complications, including alterations in the central nervous system (CNS). We have recently shown that diabetes results in a reduction of cholesterol synthesis in the brain due to decreased insulin stimulation of SREBP2-mediated cholesterol synthesis in neuronal and glial cells. In the present study, we explored the effects of the decrease in cholesterol on neuronal cell function using GT1-7 hypothalamic cells subjected to cholesterol depletion in vitro using three independent methods: 1) exposure to methyl-β-cyclodextrin, 2) treatment with the HMG-CoA reductase inhibitor simvastatin, and 3) shRNA-mediated knockdown of SREBP2. All three methods produced 20-31% reductions in cellular cholesterol content, similar to the decrease in cholesterol synthesis observed in diabetes. All cholesterol-depleted neuron-derived cells, independent of the method of reduction, exhibited decreased phosphorylation/activation of IRS-1 and AKT following stimulation by insulin, insulin-like growth factor-1, or the neurotrophins (NGF and BDNF). ERK phosphorylation/activation was also decreased after methyl-β-cyclodextrin and statin treatment but increased in cells following SREBP2 knockdown. In addition, apoptosis in the presence of amyloid-β was increased. Reduction in cellular cholesterol also resulted in increased basal autophagy and impairment of induction of autophagy by glucose deprivation. Together, these data indicate that a reduction in neuron-derived cholesterol content, similar to that observed in diabetic brain, creates a state of insulin and growth factor resistance that could contribute to CNS-related complications of diabetes, including increased risk of neurodegenerative diseases, such as Alzheimer disease.