Prairie dogs of both sexes were fed a semisynthetic diet containing 0.35% cholesterol for a period of 8 weeks. This lithogenic diet induced cholesterol gallstones in ten "lithogenic control animals", five males and five females. Three animals maintained with a high glucose, fat-free diet did not develop gallstones although the cholesterol saturation of their bile approached unity. The formation of gallstones was prevented in four out of five males and all five females fed the lithogenic diet plus 0.1% hyodeoxycholic acid (30 mg per kg body weight per day). The biles of the prairie dogs receiving hyodeoxycholic acid were abnormally colored, cloudy, and highly saturated with cholesterol but contained neither cholesterol crystals nor gallstones (with the exception of one male). Feeding the relatively hydrophilic bile acid, hyodeoxycholic acid, was associated with an increase in hepatic microsomal HMG-CoA reductase activity. Cholesterol 7 alpha-hydroxylase, on the other hand, was inhibited by the administered bile acid. The dietary hyodeoxycholic acid was transformed, in part, to 3 alpha, 6 beta-dihydroxy-5-beta-cholanoic acid and hyocholic acid. It is concluded that hyodeoxycholic acid and its metabolites did not prevent the induced cholelithiasis by causing a decrease in the concentration of biliary cholesterol. Instead, this hydrophilic bile acid apparently increases the amount of cholesterol in the bile, probably in the form of a liquid crystalline mesophase. Hyodeoxycholic acid apparently prevents gallstones by preventing the nucleation and aggregation of cholesterol crystals. The lithogenic diet induced moderate to marked bile duct proliferation together with portal fibrosis and inflammatory infiltration. The addition of hyodeoxycholic acid to the lithogenic diet reduced all of the portal tract changes.