The subcellular location of some enzymes responsible for cholesterol biosynthesis was studied in metrizamide-purified rat Leydig cells. The highest activity of 3-hydroxy-3-methyl glutaryl coenzyme A reductase (HMG-CoA reductase), a key regulatory enzyme in the cholesterol pathway, was associated with highly enriched mitochondrial fractions with recovery of 62% of the total activity and was located on the inner membrane. A significant part of the activity (35%) was also present in the cytoplasm. The activity of this enzyme in the other subcellular fractions was negligible. The HMG-CoA synthase activity was also found almost entirely in the mitochondria (90%). Otherwise no detectable activity of HMG-CoA lyase was present in the subcellular fractions studied. Furthermore, cholesterol may be synthesized from acetyl-CoA inside the mitochondrion, since a significant incorporation (90%) of [14C]acetyl-CoA into digitonin-precipitable sterols was observed in this organelle and only 10% in the cytoplasmic fraction. The evidence strongly suggests that much of the cholesterol biosynthesis that takes place in Leydig cells is carried out within the mitochondria.