Epithelial tight junction is the frontline barrier for physiological homeostasis and protection of a host and Occludin (Ocln) is a necessary component of the tight junction complex. Male Ocln knockout (Ocln-KO) mice are overall normal but infertile. The cause of this phenotype remains elusive. We found that the infertility of Ocln-mutant males is due to defects in sperm motility and capacitation – the essential functions acquired during sperm maturation in the epididymis – but not spermatogenesis in the testis, which is normal in these mutant mice. Using epididymis as an epithelial model in Ocln-KO male mice, combining transcriptomic and proteomic analyses, we found a new unconventional phagocytosis mechanism that regulates membrane cholesterol and is featured by forming double-membrane phagosome derived from the plasma membranes of epithelial TJs and. This process, which we term paracellular heterophagy or paraphagy, involves the interaction of Ocln at the TJs with the participation of autophagy machinery and a surface receptor for lipophilic cargo endocytosis to promote cholesterol removal from TJ plasma membranes. We also provide evidence that this is a general mechanism applicable to other epithelia, including airway bronchia, renal tubules, digestive intestine and circulation endothelium, but is particularly profound in epididymis in reproductive tract. Thus, we show that paraphagy at TJs by involving Ocln is a novel mechanism which senses the luminal lipophilic signals and modulates cholesterol homeostasis in epithelia.