Steryl esters and triacylglycerols are the major storage lipids of the yeast Saccharomyces cerevisiae. Steryl esters are formed in the endoplasmic reticulum by the two acyl-CoA:sterol acyltransferases Are1p and Are2p, whereas steryl ester hydrolysis is catalyzed by the three steryl ester hydrolases Yeh1p, Yeh2p and Tgl1p. To shed light on the regulatory link between steryl ester formation and hydrolysis in the maintenance of cellular sterol and free fatty acid levels we employed yeast mutants which lacked the enzymes catalyzing the degradation of steryl esters. These studies revealed feedback regulation of steryl ester formation by steryl ester hydrolysis although in a Δtgl1Δyeh1Δyeh2 triple mutant the gene expression levels of ARE1 and ARE2 as well as protein levels and stability of Are1p and Are2p were not altered. Nevertheless, the capacity of the triple mutant to synthesize steryl esters was significantly reduced as shown by in vitro and in vivo labeling of lipids with [14C]oleic acid and [14C]acetate. Enzymatic analysis revealed that inhibition of steryl ester formation occurred at the enzyme level. As the amounts and the formation of sterols and fatty acids were also decreased in the triple mutant we concluded that defects in steryl ester hydrolysis also caused feedback inhibition on the formation of sterols and fatty acids which serve as precursors for steryl ester formation. In summary, this study demonstrates a regulatory link within the steryl ester metabolic network which contributes to non-polar lipid homeostasis in yeast cells.