The intrinsic photoluminescence properties of semi-conducting single-walled carbon nanotubes (SWCNTs), including indefinite photostability, high spectral diversity, environmental sensitivity, and near infrared emission, have recently been exploited for various applications ranging from optical strain sensors to biomedical imaging labels and probes. We have recently shown that one particular separated species of polymer-wrapped SWCNT is able to detect abnormal accumulations of cholesterol and other lipids in the endolysosomal pathways of live cells, indicative of various diseases including atherosclerosis, neurodegenerative disorders, and cancer. Here, we employ all-atom REMD simulations to probe the structure and stability of the demonstrated live-cell lipid sensor. We observe rapid cholesterol aggregation and association with the exposed SWCNT surface, followed by a slower polymer rearrangement. These results shed light onto the mechanism of lipid-modulated blue-shifting observed in live-cell and live-animal experiments.