This paper proposes a cholesterol biosensor with hydrogel optical fiber immobilized with cholesterol oxidase. The hydrogel optical fiber with core and cladding structure was fabricated based on precursor solutions with two different concentrations of polyethylene glycol diacrylate (PEGDA). The concentration of fluorescent indicator in the hydrogel optical fiber core and the thickness of hydrogel cladding were optimized to obtain high performance cholesterol sensing. The sensing characteristics under different laser power, temperature, and pH were investigated. The experimental results showed that the photobleaching was reduced by appropriately decreasing the magnitude of laser power. The fluorescent indicator shows the best efficiency and stability when the ambient temperature is 25 °C and pH is 7. The linearity of the system was greater than 0.997 for cholesterol concentration in the range of 0.5–1.7 mg/mL, with good repeatability and response time of 4 mins. The precision of this sensor is 0.02 mg/mL. The hydrogel optical fiber with the advantage of flexibility, good ion permeability, and biocompatibility has broad application prospect in biomedical.