Acyl-coenzyme A:cholesterol acyltransferase (ACAT) is an intracellular enzyme that catalyzes the conjugation of long chain fatty acid and cholesterol to form cholesteryl esters. It is an integral membrane protein located in the endoplasmic reticulum. Experiments performed in intact mammalian cells have shown that the rate of cholesteryl ester synthesis in intact cells, as well as the ACAT activity from cell extracts, are greatly activated by the addition of low density lipoprotein (LDL) or oxygenated sterols such as 25-hydroxycholesterol to the growth medium. However, the molecular mechanism(s) by which sterol(s) stimulate the ACAT activity remains to be elucidated. Recently, our laboratory reported the expression cloning of human ACAT cDNA (Chang, C. C. Y., Huh, H. Y., Cadigan, K. M., and Chang, T. Y. 1993) J. Biol. Chem. 268, 20747-20755). In the current study, we report the expression of human ACAT cDNA in insect Sf9 cells. Uninfected Sf9 cells do not express detectable ACAT-like activity. Infecting these cells with recombinant virus containing ACAT cDNA caused these cells to express high levels of ACAT protein and high levels of ACAT activity when assayed in vitro. The catalytic properties of ACAT expressed in these cells were found to be similar to those found in human tissue culture cells. The combination of high level of ACAT protein expression and the low level of cellular cholesterol content in the infected cells have provided us a novel opportunity to establish a simple cell-free system, whereby stimulation of ACAT by sterols can be readily demonstrated. Using this system, we have shown that cholesterol itself can serve as an ACAT activator in vitro, in addition to its role as an ACAT substrate. The current work provides the experimental basis to hypothesize that, inside mammalian cells, cholesterol itself may serve as a physiological regulator of ACAT.