Cyclodextrin (CD), a cyclic oligosaccharide, is a pharmaceutical additive that improves the solubility of hydrophobic compounds. Recent research has focused on the potential active pharmaceutical abilities of CD. Lysosomal storage diseases are inherited metabolic diseases characterized by lysosomal dysfunction and abnormal lipid storage. Niemann-Pick disease type C (NPC) is caused by mutations in cholesterol transporter genes (NPC1, NPC2) and is characterized by cholesterol accumulation in lysosomes. A biocompatible cholesterol solubilizer 2-hydroxypropyl-β-cyclodextrin (HP-β-CD) was recently used in NPC patients for compassionate use and in clinical trials. HP-β-CD is an attractive drug candidate for NPC; however, its adverse effects, such as ototoxicity, should be solved. In this review, we discuss the current use of HP-β-CD in basic and clinical research and discuss alternative CD derivatives that may outperform HP-β-CD, which should be considered for clinical use. The potential of CD therapy for the treatment of other lysosomal storage diseases is also discussed.