The sterol storage disorder cerebrotendinous xanthomatosis (CTX) is characterized by abnormal deposition of cholesterol and cholestanol in multiple tissues. Deposition in the central nervous system leads to neurological dysfunction marked by dementia, spinal cord paresis, and cerebellar ataxia. Deposition in other tissues causes tendon xanthomas, premature atherosclerosis, and cataracts. In two unrelated patients with CTX, we have identified different point mutations in the gene (CYP27) encoding sterol 27-hydroxylase, a key enzyme in the bile acid biosynthesis pathway. Transfection of mutant cDNAs into cultured cells results in the synthesis of immunoreactive sterol 27-hydroxylase protein with greatly diminished enzyme activity. We have localized the CYP27 gene to the q33-qter interval of human chromosome 2, and to mouse chromosome 1, in agreement with the autosomal recessive inheritance pattern of CTX. These findings underscore the essential role played by sterols in the central nervous system and suggest that mutations in other sterol metabolizing enzymes may contribute to diseases with neurological manifestations.