Cholesterol homeostasis in neurons is critical for synapse formation and maintenance. Neurons with impaired cholesterol uptake undergo progressive synapse loss and eventual degeneration. To investigate the molecular mechanisms of neuronal cholesterol homeostasis and its role during synapse development, we studied motor neurons of because these neurons rely on dietary cholesterol. Combining lipidomic analysis, we discovered that NCR-1, a lysosomal cholesterol transporter, promotes cholesterol absorption and synapse development. Loss of causes smaller synapses, and low cholesterol exacerbates the deficits. Moreover, NCR-1 deficiency hinders the increase in synapses under high cholesterol. Unexpectedly, NCR-2, the NCR-1 homolog, increases the use of cholesterol and sphingomyelins and impedes synapse formation. NCR-2 deficiency causes an increase in synapses regardless of cholesterol concentration. Inhibiting the degradation or synthesis of sphingomyelins can induce or suppress the synaptic phenotypes in mutants. Our findings indicate that neuronal cholesterol homeostasis is differentially controlled by two lysosomal cholesterol transporters and highlight the importance of neuronal cholesterol homeostasis in synapse development.