Dietary protein-derived peptides are effective in improving dyslipidemia and hypercholesterolemia. We previously identified a novel cholesterol-lowering pentapeptide IIAEK from milk beta-lactoglobulin. However, it remains unclear whether IIAEK affects the micellar solubility of cholesterol and the bile acid-binding ability to lower cholesterol. Moreover, there is no direct evidence that IIAEK inhibits intestinal cholesterol absorption and affects hepatic cholesterol and fecal steroid excretion in vivo. Herein, we showed that IIAEK did not affect the micellar solubility of cholesterol and the bile acid-binding ability. However, we found that IIAEK decreased serum and liver cholesterol levels and increased fecal steroid excretion in mice. Interestingly, IIAEK markedly suppressed the intestinal absorption of [3H]-cholesterol in mice. In conclusion, we found that IIAEK ameliorated cholesterol metabolism by suppressing intestinal cholesterol absorption without affecting in vitro micellar solubility of cholesterol and the bile acid-binding ability in mice.