Sterols have been shown experimentally to bind to the Osh4 protein (a homolog of the oxysterol binding proteins) of Saccharomyces cerevisiae within a binding tunnel, which consists of antiparallel β-sheets that resemble a β-barrel and three α-helices of the N-terminus. This and other Osh proteins are essential for intracellular transport of sterols and ultimately cell life. Molecular dynamics (MD) simulations are used to study the binding of cholesterol to Osh4 at the atomic level. The structure of the protein is stable during the course of all MD simulations and has little deviation from the experimental crystal structure. The conformational stability of cholesterol within the binding tunnel is the result of direct or water-mediated interactions between the 3-hydroxyl (3-OH) group of cholesterol and Trp⁴⁶, Gln⁹⁶, Tyr⁹⁷, Asn¹⁶⁵, and/or Gln¹⁸¹. The strongest and most populated interaction is between Gln⁹⁶/3-OH. A MD simulation without the N-terminus lid that covers the binding tunnel resulted in similar binding conformations and binding energies compared to simulations with the full-length protein. Steered MD was used to determine details of the mechanism used by Osh4 to release cholesterol to the cytoplasm. Gln⁹⁶, Asn¹⁶⁵, and Gln¹⁸¹ are found to direct the cholesterol as it exits the binding tunnel, as well as Lys¹⁰⁹. The mechanism of sterol release is conceptualized as a molecular ladder with the rungs being amino acids or water-mediated amino acids that interact with 3-OH.