We report the crystallization of cholesterol (concentration in ethanol 100, 200, 300, and 400 mg/dl) in combination with ferroelectric liquid crystal (FLC) in the form of cholesterol needles. This has been investigated by dielectric spectroscopy, Raman spectroscopy, and texture analysis through optical micrographs. The foremost impression of adding cholesterol is observed with a reduction in the relative dielectric permittivity value and ferroelectric (chiral smectic C, SmC∗) to paraelectric (chiral smectic A, SmA∗) phase transition temperature with increasing concentration of cholesterol in FLC. In higher concentrations of 300 and 400 mg/dl, crystallized needles have been observed as a result of the supersaturation state of cholesterol in FLC matrix. Texture analysis has revealed that these needles are optically birefringent. Elongation of needles is found to be perpendicular to the FLC molecular director, and hence parallel to the smectic layers also. Temperature dependent investigation has shown that cholesterol-based needles disappear gradually with temperature and has not been observed in nematic and isotropic phases of the material. The results have confirmed that the lines are not only the supersaturation of cholesterol only but it is the composition of both cholesterol and FLC material. This is because when these needles disappear in SmA∗ phase the focal conic domains appear there. The understanding of the behavior of the cholesterol addition on the properties of FLC could be helpful in exploring the possibilities of using FLC as a sensing element in the biosensing of cholesterol and other molecules.