The invention relates to a method for separating and extracting cholesterol in lanolin alcohol, which comprises the following steps: carrying out molecular distillation on lanolin alcohol, collecting the light-phase fraction which is refined lanolin alcohol, heating the refined lanolin alcohol in a mixed solvent of methanol and acetone until the refined lanolin alcohol is completely dissolved, and cooling to cooling temperature, wherein the remainder of the filtrate after reduced pressure distillation is the primary concentrate of cholesterol; heating to dissolve the primary concentrate of cholesterol in acetone, cooling to precipitate, filtering, and carrying out reduced pressure distillation on the filtrate to recover the solvent, wherein the balance is the secondary concentrate of cholesterol; heating to dissolve the secondary concentrate of cholesterol in an alcohol solvent, cooling to cooling temperature, keeping the temperature for 6-12 hours, and vacuum-filtering to obtain the white acerose cholesterol crude product; and recrystallizing the cholesterol crude product through a methanol-acetone mixed solvent to obtain the refined cholesterol product. The refined cholesterol product selectively recrystallizes through the solvent to obtain the byproduct lanosterol accounting for 63-70% and the cholesterol product of which the purity is more than 90%.