The concept of targeting cholesterol metabolism to treat cancer has been widely tested in clinics, but the benefits are modest, calling for a complete understanding of cholesterol metabolism in intratumoral cells. We analyze the cholesterol atlas in the tumor microenvironment and find that intratumoral T cells have cholesterol deficiency, while immunosuppressive myeloid cells and tumor cells display cholesterol abundance. Low cholesterol levels inhibit T cell proliferation and cause autophagy-mediated apoptosis, particularly for cytotoxic T cells. In the tumor microenvironment, oxysterols mediate reciprocal alterations in the LXR and SREBP2 pathways to cause cholesterol deficiency of T cells, subsequently leading to aberrant metabolic and signaling pathways that drive T cell exhaustion/dysfunction. LXRβ depletion in chimeric antigen receptor T (CAR-T) cells leads to improved antitumor function against solid tumors. Since T cell cholesterol metabolism and oxysterols are generally linked to other diseases, the new mechanism and cholesterol-normalization strategy might have potential applications elsewhere.