Abstract When cultured human skin fibroblasts were incubated at 37°C with sonically dispersed positively charged sphingomyelin liposomes, sphingomyelin accumulated within the cell. This resulted in stimulation of cholesterol synthesis by increasing 3-hydroxy-3-methylglutaryl Coenzyme A reductase activity. Activation was rapid and was not due to the efflux of cell cholesterol or to cell growth and proliferation. Neither low density lipoprotein cholesterol nor nonlipoprotein cholesterol could suppress the sphingomyelin-induced cholesterol synthesis or activate the acyl-CoA cholesterol acyltransferase, despite an increase in cell cholesterol content. In contrast, the response to 7-ketocholesterol or 26-hydroxycholesterol was not impaired. The effect of sphingomyelin on cholesterol synthesis was temporary and reversible. Twenty-four hours after removal of sphingomyelin, cholesterol synthesis returned to normal and could be suppressed by LDL. Accumulation of sphingomyelin in the cell decreased lysosomal cholesteryl ester hydrolase but had no effect on the microsomal cholesteryl ester hydrolase. These results suggest that accumulation of sphingomyelin in the cell markedly affects cellular cholesterol homeostasis. Resultant accumulation of cholesteryl esters in the presence of extracellular cholesterol could be relevant to atherogenesis.