In tests, total cholesterol levels in rats given the supplement, known as TRF, fell by 42%.
An even bigger drop of up to 62% was seen in levels of "bad" cholesterol, low-density lipoprotein (LDL).
A small clinical trial has indicated that TRF can also reduce cholesterol levels in humans.
In addition, other animal research suggests that the vitamin can fight liver cancer.
TRF, or tocotrienol-rich fraction, is obtained from barley, oats, palm and rice.
Research leader Dr Mohammad Minhajuddin, from the University of Rochester in New York, who has studied TRF since 1996 both in India and the US, said: "Vitamin E, which has been widely studied for its health benefits, consists of both tocopherols and tocotrienols.
"Much research has focused on the tocopherols derived from corn, wheat and soybean. But the tocotrienols seem to have greater antioxidant properties and are becoming more noteworthy in scientific research."
The best TRF comes from rice bran oil, which is contained in the outer husks of rice grains.
The new findings are published in the latest issue of the journal Food and Chemical Toxicology.