Hypercholesterolemia is often observed in individuals with type 2 diabetes. Cholesterol accumulation in subcellular compartments within islet β-cells can result in insulin secretory dysfunction, which is a key pathological feature of diabetes. Previously, we demonstrated that expression of the mitochondrial cholesterol transport protein, steroidogenic acute regulatory protein (StAR), is induced in islets under conditions of β-cell dysfunction. However, whether it contributes to mitochondrial cholesterol accumulation in β-cells and cholesterol-induced β-cell dysfunction has not been determined. Thus, we sought to examine the role of StAR in isolated mouse islets under conditions of excess exogenous cholesterol. Cholesterol treatment of islets upregulated StAR expression, which was associated with cholesterol accumulation in mitochondria, decreased mitochondrial membrane potential and impaired mitochondrial oxidative phosphorylation. Impaired insulin secretion and reduced islet insulin content were also observed in cholesterol-laden islets. To determine the impact of StAR overexpression in β-cells per se, a lentivirus was used to increase StAR expression in INS-1 cells. Under these conditions, StAR overexpression was sufficient to increase mitochondrial cholesterol content, impair mitochondrial oxidative phosphorylation, and reduce insulin secretion. These findings suggest that elevated cholesterol in diabetes may contribute to β-cell dysfunction via increases in StAR-mediated mitochondrial cholesterol transport and accumulation.