Bile acid overload critically drives the pathogenesis of cholestatic liver injury (CLI). While ceramide metabolism has garnered increasing interest in liver research, the role of ceramides in CLI remains unclear. This study investigates the function of alkaline ceramidase 3 (ACER3)-catalyzed hydrolysis of unsaturated ceramides in CLI. Using clinical specimens, this work finds that ACER3 expression is upregulated in the cholestatic liver and positively correlated with the severity of CLI in patients. Acer3 ablation increases ceramide(d18:1/18:1) and attenuates bile duct ligation-induced CLI in female mice with reduced hepatic necrosis, inflammation, and fibrosis. However, it does not significantly impact CLI in male mice. Moreover, ceramide(d18:1/18:1) treatment attenuates CLI in wild-type female mice. Similarly, ACER3 knockdown and ceramide(d18:1/18:1) treatment prevent lithocholic-acid-induced cell death in human-liver-derived HepG2 cells. Mechanistically, ceramide(d18:1/18:1) binds the ligand binding domain of the liver X receptor β, acting as an agonist to activate its transcriptional functions. This activation upregulates sulfotransferase 2A1-catalyzed bile acid sulfation, normalizes bile acid metabolism, and restores lipogenesis, thereby reducing bile acid overload in hepatocytes to attenuate CLI. Our findings uncover the role of ceramide(d18:1/18:1)-liver X receptor β signaling in mitigating bile acid overload in the cholestatic liver, offering mechanistic insights and suggesting therapeutic potential for targeting ACER3 and ceramide(d18:1/18:1) for CLI.