Niemann-Pick C disease is a fatal neurodegenerative disorder characterized by an endolysosomal accumulation of cholesterol and other lipids. One form of the disease is caused by a deficiency in NPC2, a soluble lysosomal glycoprotein that binds cholesterol. To better understand the biological function of NPC2 and how its deficiency results in disease, we have characterized the structural and functional properties of recombinant human protein. Highly purified NPC2 consists of a complex mixture of glycosylated isoforms, similar to that observed in human brain autopsy specimens. Mass spectrometric analysis revealed that of the three potential N-linked glycosylation sites present in the mature protein, Asn-19 is not utilized; Asn-39 is linked to an endoglycosidase H (Endo H)-sensitive oligosaccharide, and Asn-116 is variably utilized, either being unmodified or linked to Endo H-sensitive or Endo H-resistant oligosaccharides. All glycoforms are endocytosed and ameliorate the cholesterol storage phenotype of NPC2-deficient fibroblasts. In addition, the purified preparation contains a mixture of both free and lipid-bound protein. All glycoforms bind cholesterol, and sterol binding to NPC2 significantly alters its behavior upon cation-exchange chromatography. Based on this observation, we developed chromatography-based binding assays and determined that NPC2 forms an equimolar complex with the fluorescent cholesterol analog dehydroergosterol. In addition, we find that NPC2 binds a range of cholesterol-related molecules (cholesterol precursors, plant sterols, some oxysterols, cholesterol sulfate, cholesterol acetate, and 5-alpha-cholestan-3-one) and that 27-hydroxysterol accumulates in NPC2-deficient mouse liver. Binding was not detected for various glycolipids, phospholipids, or fatty acids. These biochemical properties support a direct and specialized function of NPC2 in lysosomal sterol transport.