Cyclodextrins, representing a versatile family of cyclic oligosaccharides, have extensive pharmaceutical applications due to their unique truncated cone-shaped structure with a hydrophilic outer surface and a hydrophobic cavity, which enables them to form non-covalent host-guest inclusion complexes in pharmaceutical formulations to enhance the solubility, stability and bioavailability of numerous drug molecules. As a result, cyclodextrins are mostly considered as inert carriers during their medical application, while their ability to interact not only with small molecules but also with lipids and proteins is largely neglected. By forming inclusion complexes with cholesterol, cyclodextrins deplete cholesterol from cellular membranes and thereby influence protein function indirectly through alterations in biophysical properties and lateral heterogeneity of bilayers. In this review, we summarize the general chemical principles of direct cyclodextrin-protein interactions and highlight, through relevant examples, how these interactions can modify protein functions in vivo, which, despite their huge potential, have been completely unexploited in therapy so far. Finally, we give a brief overview of disorders such as Niemann-Pick type C disease, atherosclerosis, Alzheimer's and Parkinson's disease, in which cyclodextrins already have or could have the potential to be active therapeutic agents due to their cholesterol-complexing or direct protein-targeting properties.