Cellular lipids determine membrane integrity and fluidity and are being increasingly recognized to influence immune responses. Cellular cholesterol requirements are fulfilled through biosynthesis and uptake programs. In an intricate pathway involving the lysosomal cholesterol transporter NPC1, the sterol gets unequally distributed across intracellular compartments. By using pharmacological and genetic approaches targeting NPC1, we reveal that blockade of cholesterol trafficking through the late endosome–lysosome pathway blunts NLRP3 inflammasome activation. Altered cholesterol localization at the plasma membrane (PM) in Npc1−/− cells abrogated AKT–mTOR signaling by TLR4. However, the inability to activate the NLRP3 inflammasome was traced to perturbed cholesterol trafficking to the ER but not the PM. Accordingly, acute cholesterol depletion in the ER membranes by statins abrogated casp-1 activation and IL-1β secretion and ablated NLRP3 inflammasome assembly. By contrast, assembly and activation of the AIM2 inflammasome progressed unrestricted. Together, this study reveals ER sterol levels as a metabolic rheostat for the activation of the NLRP3 inflammasome.