The sterol sensor SCAP is a key regulator of SREBP-2, the major transcription factor controlling cholesterol synthesis. Recently, we showed that there is a global down-regulation of cholesterol synthetic genes, as well as SREBP-2, in the brains of diabetic mice, leading to a reduction of cholesterol synthesis. We now show that in mouse models of type 1 and type 2 diabetes, this is, in part, the result of a decrease of SCAP. Homozygous disruption of the Scap gene in the brains of mice causes perinatal lethality associated with microcephaly and gliosis. Mice with haploinsufficiency of Scap in the brain show a 60% reduction of SCAP protein and ~30% reduction in brain cholesterol synthesis, similar to what is observed in diabetic mice. This results in impaired synaptic transmission, as measured by decreased paired pulse facilitation and long-term potentiation, and is associated with behavioral and cognitive changes. Thus, reduction of SCAP and the consequent suppression of cholesterol synthesis in the brain may play an important role in the increased rates of cognitive decline and Alzheimer disease observed in diabetic states.