The importance of cholesterol and "oxysterols" in the regulation of cholesterol 7 alpha-hydroxylase is not clear. Previous in vivo studies suggest that cholesterol may up-regulate cholesterol 7 alpha-hydroxylase, the rate-limiting enzyme in bile acid biosynthesis, but these studies are open to question as they were carried out in whole animals. Therefore, we used primary rat hepatocytes, cultured in serum-free medium, to determine the effects of cholesterol on the regulation of cholesterol 7 alpha-hydroxylase. Squalestatin, a specific squalene synthase inhibitor, was used to block sterol but not isoprenoid biosynthesis in this system. Squalestatin (1 microM) decreased cholesterol 7 alpha-hydroxylase specific activity to undetectable levels and decreased steady-state mRNA and transcriptional activity to 13% and 47% of controls, respectively. Mevalonolactone (2 mM) failed to restore cholesterol 7 alpha-hydroxylase specific activity or steady-state mRNA levels in squalestatin-treated cells. Addition of cholesterol, delivered in beta-cyclodextrin, to squalestatin-treated cells restored cholesterol 7 alpha-hydroxylase specific activity and steady-state mRNA to control levels in a concentration (25 microM to 200 microM) -dependent manner. In contrast, the individual addition of selected "oxysterols" (5-cholesten-3 beta, 7 alpha-diol; 5 alpha-cholestan-3 beta, 6 alpha-diol; cholestan-3 beta, 5 alpha,6 beta-triol; 5-(25R)-cholesten-3 beta,26-diol, all at 50 microM) failed to restore cholesterol 7 alpha-hydroxylase mRNA levels in squalestatin-treated cells. These experiments provide evidence that cholesterol rather than "oxysterols" regulate cholesterol 7 alpha-hydroxylase gene expression. Squalestatin (1 microM) treatment increased HMG-CoA reductase specific activity by 229% of controls. Addition of cholesterol (200 microM), but not mevalonolactone (2 mM), to squalestatin-treated cells decreased HMG-CoA reductase specific activity to 19% of control. The primary rat hepatocyte culture system in conjunction with a specific squalene synthetase inhibitor should be a useful model for elucidating the mechanism of regulation of cholesterol 7 alpha-hydroxylase gene expression by sterols.