A water-soluble derivative of cholesterol, methoxypolyoxyethylated (MPOE) cholesterol, has been synthesized and used to study the regulation of 3-hydroxy-3-methylglutaryl coenzyme A (HMG-CoA) reductase, the key regulatory enzyme in cholesterol biosynthesis. MPOE cholesterol causes a specific, rapid and linear decline in HMG-CoA reductase in cultured rat liver cells. MPOE cholesterol is not a direct allosteric inhibitor of HMG-CoA reductase, does not appear to regulate HMG-CoA reductase through changes in membrane environment, and does not change the phosphorylation state and level of activation of rat liver cell HMG-CoA reductase. In order to confirm our data, which were consistent with a model in which MPOE cholesterol regulates the amount of HMG-CoA reductase and not its activity, we made direct measurements of reductase mRNA levels. The decline in HMG-CoA reductase in MPOE cholesterol-treated rat liver cells is preceded by the rapid disappearance of HMG-CoA reductase mRNA. As a water-soluble cholesterol derivative, MPOE cholesterol represents a useful model compound for studies on the regulation of the level of HMG-CoA reductase and its cognate mRNA.