The 2,3-seco pathway, the pathway for anaerobic cholesterol degradation, has been established in the denitrifying betaproteobacterium Sterolibacterium denitrificans. However, knowledge of how microorganisms respond to cholesterol at the community level is elusive. Here, we applied mesocosm incubation and 16S rRNA sequencing to reveal that, in denitrifying sludge communities, three betaproteobacterial operational taxonomic units (OTUs) with low (94% to 95%) 16S rRNA sequence similarity to Stl. denitrificans are cholesterol degraders and members of the rare biosphere. Metatranscriptomic and metabolite analyses show that these degraders adopt the 2,3-seco pathway to sequentially catalyze the side chain and sterane of cholesterol and that two molybdoenzymes-steroid C25 dehydrogenase and 1-testosterone dehydrogenase/hydratase-are crucial for these bioprocesses, respectively. The metatranscriptome further suggests that these betaproteobacterial degraders display chemotaxis and motility toward cholesterol and that FadL-like transporters may be the key components for substrate uptake. Also, these betaproteobacteria are capable of transporting micronutrients and synthesizing cofactors essential for cellular metabolism and cholesterol degradation; however, the required cobalamin is possibly provided by cobalamin-de novo-synthesizing gamma-, delta-, and betaproteobacteria via the salvage pathway. Overall, our results indicate that the ability to degrade cholesterol in sludge communities is reserved for certain rare biosphere members and that C25 dehydrogenase can serve as a biomarker for sterol degradation in anoxic environments. IMPORTANCE Steroids are ubiquitous and abundant natural compounds that display recalcitrance. Biodegradation via sludge communities in wastewater treatment plants is the primary removal process for steroids. To date, compared to studies for aerobic steroid degradation, the knowledge of anaerobic degradation of steroids has been based on only a few model organisms. Due to the increase of anthropogenic impacts, steroid inputs may affect microbial diversity and functioning in ecosystems. Here, we first investigated microbial functional responses to cholesterol, the most abundant steroid in sludge, at the community level. Our metagenomic and metatranscriptomic analyses revealed that the capacities for cholesterol approach, uptake, and degradation are unique traits of certain low-abundance betaproteobacteria, indicating the importance of the rare biosphere in bioremediation. Apparent expression of genes involved in cofactor de novo synthesis and salvage pathways suggests that these micronutrients play important roles for cholesterol degradation in sludge communities.