In chronic liver diseases, regardless of their etiology, the development of fibrosis is the first step toward the progression to cirrhosis, portal hypertension, and hepatocellular carcinoma. Hepatic stellate cells (HSCs) are the main profibrogenic cells that promote the pathogenesis of liver fibrosis, and so it is important to identify the molecules that regulate HSCs activation and liver fibrosis. Niemann-Pick type C2 (NPC2) protein plays an important role in the regulation of intracellular cholesterol homeostasis by directly binding with free cholesterol. However, the roles of NPC2 in HSCs activation and liver fibrosis have not been explored in detail. Since a high-cholesterol diet exacerbates liver fibrosis progression in both rodents and humans, we propose that the expression of NPC2 affects free cholesterol metabolism and regulates HSCs activation. In this study, we found that NPC2 is decreased in both thioacetamide- and carbon tetrachloride-induced liver fibrosis tissues. In addition, NPC2 is expressed in quiescent HSCs, but its activation status is down-regulated. Knockdown of NPC2 in HSC-T6 cells resulted in marked increases in transforming growth factor-β1 (TGF-β1)-induced collagen type 1 α1 (Col1a1), α-smooth muscle actin (α-SMA) expression, and Smad2 phosphorylation. In contrast, NPC2 overexpression decreased TGF-β1-induced HSCs activation. We further demonstrated that NPC2 deficiency significantly increased the accumulation of free cholesterol in HSCs, increasing Col1a1 and α-SMA expression and activating Smad2, and leading to sensitization of HSCs to TGF-β1 activation. In contrast, overexpression of NPC2 decreased U18666A-induced free cholesterol accumulation and inhibited the subsequent HSCs activation. In conclusion, our study has demonstrated that NPC2 plays an important role in HSCs activation by regulating the accumulation of free cholesterol. NPC2 overexpression may thus represent a new treatment strategy for liver fibrosis.