Cholesteryl esters have been incorporated into phospholipid vesicles up to 5 mole percent. Excess ester separates out into a separate phase which resembles the mesomorphic droplets of atherosclerosis. The incorporation of 5 mole percent cholesteryl palmitate is shown by 31P NMR studies to increase the permeability of the model membranes to ions 10-fold. The same incorporation of cholesteryl linoleate does not affect the membrane permeability. Implications of these findings, and the significance of the cholesteryl ester/free cholesterol ratio upon atherosclerosis is discussed.