Acyl-CoA:cholesterol acyltransferase was found predominantly (85%) in RNA-rich microsomes, the rest being in RNA-poor and smooth microsomes. However, the esterified cholesterol concentration of smooth microsomes was 2-fold greater than that of RNA-rich microsomes, suggesting the possibility of an interaction between RNA-rich and smooth microsomes. The distribution of cholesteryl ester between microsome subfractions was examined after incubation of a mixture of RNA-rich and smooth microsomes with [1-14C]palmitoyl-CoA. Based upon specific acyl-CoA:cholesterol acyltransferase activities of the individual fractions, only 31 +/- 3% of the total cholesteryl ester radioactivity should have been found in the smooth component. However, the smooth microsomes contained 54 +/- 3% (p < 0.01) of the radioactive cholesteryl esters. The entrapment of radioactive cholesteryl ester in the smooth microsomes could not be accounted for by passive transfer of cholesteryl ester from RNA-rich microsomes to smooth microsomes. It is proposed that cholesterol in the smooth microsomal membranes may have been esterified by acyl-CoA:cholesterol acyltrasferase located on the surface of RNA-rich microsomes with the resulting cholesteryl ester retained in the smooth microsomes. This hypothesis was strengthened by the observation that acyl-CoA:cholesterol acyl-transferase was located on the cytoplasmic surface of the RNA-rich microsomal vesicle.