The authors studied xanthomatous skin in cholesterol-fed rabbits for changes in lipid content and in activities of enzymes regulating intracellular lipid content. After 80 days of hypercholesterolemic diet, xanthomas were widespread and changes in lipid metabolism were marked. In both tissue homogenates and cell membrane pellets, unesterified cholesterol and phospholipids increased 2-fold to 6-fold, and cholesteryl esters increased about 30-fold. Tissue triglycerides, however, decreased to half the levels found in control skin. Cholesterol esterification rates, measured by activity of acyl coenzyme A: cholesterol acyltransferase, increased moderately to markedly; hydrolase activity against 4-methylumbelliferyl oleate also increased at both acid and neutral pH, but hydrolase activity against cholesterol oleate increased only at acid pH. Thus, hypercholesterolemia caused striking increases in intracellular cholesterol esterification rates, increases in lipase activity at both neutral and acid pH, and increases in cholesteryl ester hydrolase activity at acid pH. Increases in cholesterol-esterifying activity uniformly exceeded increases in cholesteryl ester hydrolytic activity in congruence with net accumulation of cholesteryl ester. Skin xanthoma grade, however, had no consistent relation to the cholesterol esterification rates. Instead, the enzyme data suggested that marked abnormalities of lipid metabolism are diffusely distributed through dermal tissue as a precondition for the focal emergence of xanthomas.