To determine the physical state of lipids in tendon xanthomata, six specimens surgically removed from three patients with familial hypercholesterolemia were studied by microscopy, calorimetry, and x-ray diffraction. The major constituents of the xanthomata were lipid (33% of dry weight) and collagen (24% of dry weight). The principal lipids were cholesterol ester and cholesterol. Light microscopy and thin-section electron microscopy showed occasional clusters of foam cells separated by masses of extracellular collagen. Polarized light microscopy of fresh, minced tissue showed rare droplets of free cholesterol ester. When heated, the tissue shrank abruptly at approximately equal to 70 degrees C and, consequently, a large amount of cholesterol ester was released. Scanning calorimetry of fresh pieces of xanthoma showed a single, broad, reversible liquid crystalline transition of cholesterol ester with peak temperature from 32 to 38 degrees C. The enthalpy (0971 +/- 0.07 cal/g) was reduced compared with the isolated cholesterol ester from each xanthoma (1.1+/-0.01 cal/g). There was a large irreversible collagen denaturation endotherm (peak temperature = 67 degrees C; enthalpy 9.9 cal/g collagen) that corresponded to the tissue shrinkage noted by microscopy. After the collagen denaturation, the sample displayed double-peaked reversible liquid crystalline transitions of cholesterol ester, of enthalpy 1.18 +/- 0.1 cal/g, that were identical to transitions of isolated cholesterol ester. Fibers dissected fron xanthomata were examined by X-ray diffraction at temperatures below and above the cholesterol ester transition. At 20 degrees C there was a weakly oriented equatorial reflection of Bragg spacing 36A, which corresponded to the smectic phase of cholesterol ester, and a series of oriented collagen reflections. At 42 degrees C the cholesterol ester reflection disappeared. Stretched fibers examined at 10 degrees C showed good orientation of collagen and cholesterol ester reflections, and in addition, meridional spacings which indicated oriented crystallization of cholesterol ester. These studies suggest that a major component of tendon xanthomata is extracellular cholesterol ester which displays altered melting and molecular orientation as a result of an interaction with collagen. At xanthoma temperatures, the cholesterol ester is in a smectic liquid crystalline state, probably layered between collagen fibrils, with the long axis of the cholesterolester molecules perpendicular to the axis of the collagen fiber. Such collagen-cholesterol ester interactions may favor the extracellular deposition of cholesterol ester derived either from intracellular sources or directly from plasma lipoproteins.