Late endosomes (LEs) have characteristic intracellular distributions determined by their interactions with various motor proteins. Motor proteins associated to the dynactin subunit p150(Glued) bind to LEs via the Rab7 effector Rab7-interacting lysosomal protein (RILP) in association with the oxysterol-binding protein ORP1L. We found that cholesterol levels in LEs are sensed by ORP1L and are lower in peripheral vesicles. Under low cholesterol conditions, ORP1L conformation induces the formation of endoplasmic reticulum (ER)-LE membrane contact sites. At these sites, the ER protein VAP (VAMP [vesicle-associated membrane protein]-associated ER protein) can interact in trans with the Rab7-RILP complex to remove p150(Glued) and associated motors. LEs then move to the microtubule plus end. Under high cholesterol conditions, as in Niemann-Pick type C disease, this process is prevented, and LEs accumulate at the microtubule minus end as the result of dynein motor activity. These data explain how the ER and cholesterol control the association of LEs with motor proteins and their positioning in cells.