The involvement of pancreatic cholesterol esterase (bile salt-stimulated lipase) in cholesterol absorption through the intestine has been controversial. We have addressed this issue by using homologous recombination in embryonic stem cells to produce mice lacking a functional cholesterol esterase gene. Cholesterol esterase knockout mice and their wild type counterparts were fed a bolus dose of [3H]cholesterol and a trace amount of [beta-14C]sitosterol by gavage. The ratio of the two radiolabels excreted in the feces over a 24-h period was found to be similar in the control and cholesterol esterase-null mice. Similar results were observed when the radiolabeled sterols were supplied in an emulsion with phospholipid and triolein or in lipid vesicles with phosphatidylcholine. Cholesterol absorption results were similar between the control and cholesterol esterase-null mice regardless of whether the animals were fed a low fat diet or a high fat/high cholesterol diet. The rate of [3H]cholesterol appearance in the serum of the gene-targeted mice paralleled that observed in control animals. In contrast to these results, when experiments were performed with [3H]cholesteryl oleate instead of [3H]cholesterol, a higher amount of the 3H radiolabel was found excreted in feces and dramatically less of the radiolabel was detected in the serum of the cholesterol esterase-null mice in comparison with that detected in control animals. Serum cholesterol levels were not significantly different between control and cholesterol esterase-null mice fed either control or an atherogenic diet. These results indicate that cholesterol esterase is responsible for mediating intestinal absorption of cholesteryl esters but does not play a primary role in free cholesterol absorption.