ACAT1 (acyl-CoA:cholesterol acyltransferase 1) is thought to have two distinct sterol-binding sites: a substrate-binding site and an allosteric-activator site. In the present work, we investigated the structural features of various sterols as substrates and/or activators in vitro. The results show that without cholesterol, the plant sterol sitosterol is a poor substrate for ACAT. In the presence of cholesterol, ACAT1-mediated esterification of sitosterol is highly activated while ACAT2-mediated esterification of sitosterol is only moderately activated. For ACAT1, we show that the stereochemistry of the 3-hydroxy group at steroid ring A is a critical structural feature for a sterol to serve as a substrate, but less critical for activation. Additionally, enantiomeric cholesterol, which has the same biophysical properties as cholesterol in membranes, fails to activate ACAT1. Thus ACAT1 activation by cholesterol is the result of stereo-specific interactions between cholesterol and ACAT1, and is not related to the biophysical properties of phospholipid membranes. To demonstrate the relevance of the ACAT1 allosteric model in intact cells, we showed that sitosterol esterification in human macrophages is activated upon cholesterol loading. We further show that the activation is not due to an increase in ACAT1 protein content, but is partly due to an increase in the cholesterol content in the endoplasmic reticulum where ACAT1 resides. Together, our results support the existence of a distinct sterol-activator site in addition to the sterol-substrate site of ACAT1 and demonstrate the applicability of the ACAT1 allosteric model in intact cells.