NPC is a neurodegenerative disorder characterized by cholesterol accumulation in endolysosomal compartments. It is caused by mutations in the gene encoding NPC1, an endolysosomal protein mediating intracellular cholesterol trafficking. Cognitive and psychiatric alterations are hallmarks in NPC patients pointing to synaptic defects. However, the role of NPC1 in synapses has not been explored. We show that NPC1 is present in the postsynaptic compartment and is locally translated during LTP. A mutation in a region of the NPC1 gene commonly altered in NPC patients reduces NPC1 levels at synapses due to enhanced NPC1 protein degradation. This leads to shorter postsynaptic densities, increased synaptic cholesterol and impaired LTP in NPC1nmf164 mice with cognitive deficits. NPC1 mediates cholesterol mobilization and enables surface delivery of CYP46A1 and GluA1 receptors necessary for LTP, which is defective in NPC1nmf164 mice. Pharmacological activation of CYP46A1 normalizes synaptic levels of cholesterol, LTP and cognitive abilities, and extends life span of NPC1nmf164 mice. Our results unveil NPC1 as a regulator of cholesterol dynamics in synapses contributing to synaptic plasticity, and provide a potential therapeutic strategy for NPC patients.