The Steinernema carpocapsae nematode is known to release several excretory/secretory products (ESPs) in its venom upon contact and during the parasitic infection process of insect hosts. A recurrent family of proteins found in this nematode's venom is the CAP (cysteine-rich secretory protein/antigen 5/pathogenesis-related 1) protein, but the functional role of these proteins remains unknown. To elucidate the biological function, this study focused on characterising the secreted protein, first identified in the venom of the nematode's parasitic stage, and the sequence retrieved from transcriptomic analysis. The structural comparisons of the Sc-CAP protein model, as determined by AlphaFold2, revealed related structures from other parasitic nematodes of vertebrates. Some of these closely related proteins are reported to have sterol-binding ability. The Sc-CAP recombinant protein was successfully produced in Escherichia coli in conjunction with a chaperone protein. The results showed that the Sc-CAP protein binds to cholesterol, and docking analyses of sterols on the protein revealed potential molecular interactions. Immunoassays performed in Galleria mellonella larvae revealed that this venom protein has an inhibitory effect against phenoloxidase and the antimicrobial response of insects. This suggests that the venom protein has an immunomodulatory function against insects, emphasising its importance during the parasite-host interaction.