We examined the effect of cholestanol (5 alpha-dihydrocholesterol) on cholesterol and bile acid metabolism in BALB/c mice. After feeding 1% cholestanol in the diet for 14 months, gallstones composed of 55% cholesterol and 45% cholestanol developed in 20% of the mice and were associated with mucosal inflammation and serosal vessel thickening of the gallbladder. Cholestanol concentrations increased 42-fold in the serum (0.17 versus 0.004 mg/ml) and 18-fold in the liver (0.55 versus 0.03 mg/g) as compared with control mice, whereas cholesterol declined 20 and 26% in serum and liver, respectively. Hepatic microsomal HMG-CoA reductase activity, reflecting cholesterol synthesis, rose 51% (from 7.2 to 10.9 pmol/mg/min). In contrast, hepatic microsomal cholesterol 7 alpha-hydroxylase activity, the rate-determining enzyme for bile acid synthesis, was severely depressed as compared with control mice (0.9 versus 2.2 pmol/mg/min). Discontinuing cholestanol from the diet for 1 month reduced the elevated serum and liver cholestanol concentrations and restored hepatic HMG-CoA reductase and cholesterol 7 alpha-hydroxylase activities to normal. These results demonstrate that cholestanol is absorbed, replaces cholesterol in serum and liver, causes increased cholesterol synthesis, but inhibits bile acid synthesis. The combination of increased cholesterol synthesis with decreased bile acid formation promotes gallstone formation in cholestanol-fed mice.