Background: The preventative effect of melatonin on the development of obesity and the progression of fatty liver under a high-fat diet (HFD) has been well elucidated through previous studies. We investigated the mechanism behind this effect regarding cholesterol biosynthesis and regulation of cholesterol levels. Methods: Mice were divided into three groups: normal chow diet (NCD); HFD; and HFD and melatonin administration group (HFD+M). We assessed the serum lipid profile, mRNA expression levels of proteins involved in cholesterol synthesis and reabsorption in the liver and nutrient transporters in the intestines, and cytokine levels. Additionally, an in vitro experiment using HepG2 cells was performed. Results: Expression of hepatic sterol regulatory element-binding protein 2 (SREBP-2), 3-hydroxy-3-methylglutaryl coenzyme A reductase (HMGCR), and low-density lipoprotein receptor (LDLR) demonstrated that melatonin administration significantly reduces hepatic cholesterol synthesis in mice fed an HFD. Expression of intestinal sodium-glucose transporter 1 (SGLT1), glucose transporter 2 (GLUT2), GLUT5, and Niemann-pick C1-like 1 (NPC1L1) demonstrated that melatonin administration significantly reduces intestinal carbohydrate and lipid absorption in mice fed an HFD. There were no differences in local and circulatory inflammatory cytokine levels among the NCD, HFD, and HFD+M group. HepG2 cells stimulated with palmitate showed reduced levels of SREBP, LDLR, and HMGCR indicating these results are due to the direct mechanistic effect of melatonin on hepatocytes. Conclusion Collectively, these data indicate the mechanism behind the protective effects of melatonin from weight gain and liver steatosis under HFD is through a reduction in intestinal caloric absorption and hepatic cholesterol synthesis highlighting its potential in the treatment of obesity and fatty liver disease.