We and others have previously demonstrated that congenital deficiency of the nuclear hormone receptor, Rorα1, in staggerer (sg/sg) mice results in resistance to diet-induced obesity and increased insulin sensitivity. Paradoxically, the sg/sg mice are susceptible to atherosclerosis and display impaired innate immunity, underscoring the regulatory links between metabolic disease, inflammation, and susceptibility to infection. Here, we present novel evidence that Rorα1 regulates innate immune function by demonstrating impaired phagocytosis in sg/sg mice. The early stages of Fc-γ receptor-mediated phagocytosis in lipopolysaccharide-activated sg/sg bone marrow-derived macrophages (BMMs) were significantly impaired compared with wild-type cells. Moreover, in sg/sg BMMs, the phagocytic cup membranes had reduced levels of cholesterol. Expression profiling revealed dysregulated expression of genes involved in inflammation and lipid metabolism in sg/sg BMMs. Notably, we identified decreased expression of the mRNA encoding cholesterol 25-hydroxylase (Ch25h), an enzyme that converts cholesterol to 25-hydroxycholesterol (25HC), an oxysterol with emerging roles in immunity. Treatment of sg/sg BMMs with 25HC rescued phagocytosis in a dose-dependent manner, whereas small interfering RNA knockdown of Ch25h mRNA expression in wild-type cells attenuated phagocytosis. Hence, we propose that 25HC is essential for optimizing membrane internalization during phagocytosis and that aberrant Ch25h expression in Rorα1-deficient sg/sg macrophages disrupts phagocytosis. Our studies reveal new roles for Rorα1, Ch25h, and 25HC in phagocytosis. Aberrant 25HC underpins the paradoxical association between insulin sensitivity and impaired innate immunity in Rorα1-deficient mice, heralding a wider and essential role for this oxysterol at the nexus of metabolism and immunity.