Catalyzes the formation of 25-hydroxycholesterol from cholesterol, leading to repress cholesterol biosynthetic enzymes (PubMed:9852097). Plays a key role in cell positioning and movement in lymphoid tissues: 25-hydroxycholesterol is an intermediate in biosynthesis of 7-alpha,25-dihydroxycholesterol (7-alpha,25-OHC), an oxysterol that acts as a ligand for the G protein-coupled receptor GPR183/EBI2, a chemotactic receptor for a number of lymphoid cells. May play an important role in regulating lipid metabolism by synthesizing a corepressor that blocks sterol regulatory element binding protein (SREBP) processing. In testis, production of 25-hydroxycholesterol by macrophages may play a role in Leydig cell differentiation.