The risk of cardiovascular disease in type 1 diabetes remains extremely high, despite marked advances in blood glucose control and even the widespread use of cholesterol synthesis inhibitors. Thus, a deeper understanding of insulin regulation of cholesterol metabolism, and its disruption in type 1 diabetes, could reveal better treatment strategies. To define the mechanisms by which insulin controls plasma cholesterol levels, we knocked down the insulin receptor, FoxO1, and the key bile acid synthesis enzyme, CYP8B1. We measured bile acid composition, cholesterol absorption, and plasma cholesterol. In parallel, we measured markers of cholesterol absorption and synthesis in humans with type 1 diabetes treated with ezetimibe and simvastatin in a double-blind crossover study. Mice with hepatic deletion of the insulin receptor showed marked increases in 12α-hydroxylated bile acids, cholesterol absorption, and plasma cholesterol. This phenotype was entirely reversed by hepatic deletion of FoxO1. FoxO1 is inhibited by insulin and required for the production of 12α-hydroxylated bile acids, which promote intestinal cholesterol absorption and suppress hepatic cholesterol synthesis. Knockdown of Cyp8b1 normalized 12α-hydroxylated bile acid levels and completely prevented hypercholesterolemia in mice with hepatic deletion of the insulin receptor (n=5-30), as well as mouse models of type 1 diabetes (n=5-22). In parallel, the cholesterol absorption inhibitor, ezetimibe, normalized cholesterol absorption and low-density lipoprotein cholesterol in patients with type 1 diabetes as well as, or better than, the cholesterol synthesis inhibitor, simvastatin (n=20). Insulin, by inhibiting FoxO1 in the liver, reduces 12α-hydroxylated bile acids, cholesterol absorption, and plasma cholesterol levels. Thus, type 1 diabetes leads to a unique set of derangements in cholesterol metabolism, with increased absorption rather than synthesis. These derangements are reversed by ezetimibe, but not statins, which are currently the first line of lipid-lowering treatment in type 1 diabetes. Taken together, these data suggest that a personalized approach to lipid lowering in type 1 diabetes may be more effective and highlight the need for further studies specifically in this group of patients.