Stokke has described a lysosomal cholesterol ester hydrolase (CEH) in human liver. To clarify the significance of this enzyme, we first modified Stokke's assay to enable CEH determination in hepatic needle biopsies. Studies established optimal pH of 4.6--5.2 and linearity of hydrolysis for at least 12 hours, using homogenates containing about 2 mg liver and radiolabeled cholesterol oleate as substrate. The assay was then applied to patients undergoing percutaneous needle biopsy. Hepatic CEH activity in alcoholic liver disease, obstructive jaundice and a variety of other hepatic disorders was not significantly different from that in histologically normal livers. In patients with acute hepatitis, however, mean CEH activity was more than 3-fold increased (P less than 0.01). Values paralleled SGOT levels, returned to normal as hepatitis resolved, and were unrelated to serum cholesterol levels or to lecithin:cholesterol acyltransferase activity. In contrast to CEH, activity of acid phosphatase, a standard lysosomal marker enzyme, was the same in hepatitic as in normal livers. We conclude that CEH can be assayed in needle biopsies of human liver, that its activity increases in acute hepatitis, and that this is probably not simply due to a nonspecific general increase in lysosmal enzymes.