Changes in chromatin structure regulate gene expression and genome maintenance. Molecules that bind to the nucleosome, the complex of DNA and histone proteins, are key modulators of chromatin structure. Previous work indicated that cholesterol, a ubiquitous cellular lipid, may bind to chromatin in vivo, suggesting a potential function for lipids in modulating chromatin architecture. However, the molecular mechanisms of cholesterol’s action on chromatin structure have remained unclear. Here, we explored the biophysical impact of cholesterol on nucleosome and chromatin fibers reconstituted in vitro and characterized in silico the cholesterol binding to the nucleosome. Our findings support that cholesterol assists 10 and 30 nm chromatin formation and induces folding of long chromatin fibers as a result of direct interaction of the cholesterol to six nucleosomal binding sites.