The small intestine is the primary site of dietary lipid absorption in mammals. The balance of nutrients, microorganisms, bile, and mucus that determine intestinal luminal environment cannot be recapitulated ex vivo, thus complicating studies of lipid absorption. We show that fluorescently labeled lipids can be used to visualize and study lipid absorption in live zebrafish larvae. We demonstrate that the addition of a BODIPY-fatty acid to a diet high in atherogenic lipids enables imaging of enterocyte lipid droplet dynamics in real time. We find that a lipid-rich meal promotes BODIPY-cholesterol absorption into an endosomal compartment distinguishable from lipid droplets. We also show that dietary fatty acids promote intestinal cholesterol absorption by rapid re-localization of NPC1L1 to the intestinal brush border. These data illustrate the power of the zebrafish system to address longstanding questions in vertebrate digestive physiology.