A topical ophthalmic formulation of an LXR agonist that could be used for treating dry-eye disease. Examples of LXR agonists that could be used include naturally occurring oxysterol compounds, such as ouabagenin or hyodeoxycholic acid, or synthetic, non-sterol compounds such as IMB-151 or T0901317. The LXR agonist compound may be encapsulated within biodegradable nanoparticles, such as poly(lactic/glycolic) acid (PLGA) nanoparticles, micelles, or liposomes. Experimental work establishing proof-of-concept has been performed.