The source of the cholesterol used for ester synthesis by cultured rat hepatoma cells was examined. The activities synthesizing and esterifying cholesterol co-distributed with RNA at a high buoyant density, presumably in the rough endoplasmic reticulum (RER). Cholesterol mass was undetectable in the RER, and the transfer of cholesterol synthesized in the RER to the cell surface was more than 100 times greater than was its esterification. Similarly, essentially all of the cholesterol liberated from ingested intracellular lipoproteins was recovered at the cell surface. The plasma membranes, which contained approximately 87% of cell cholesterol, provided > 100 times more cholesterol for esterification in the RER than did nascent cholesterol. The supply of cholesterol was rate-limiting for esterification in cell homogenates. Prior oxidation of plasma membrane cholesterol in intact cells reduced the acyl-CoA:cholesterol acyltransferase activity in isolates proportionately. Finally, cholesterol in hepatoma plasma membranes was a far better substrate for in vitro esterification than was that in fibroblast plasma membranes, red blood cell ghosts, or liposomes. We conclude that the level of saturation of acyl-CoA:cholesterol acyltransferase, controlled principally through the bidirectional movement of the substrate between plasma membranes and RER, plays a major role in the regulation of cholesterol esterification.