The regulation of neutral cholesterol ester hydrolase activity by changes in its phosphorylation state was studied in rat liver microsomes. Treatment with cAMP-dependent protein kinase resulted in increased enzyme activity, which was further enhanced by the addition of cAMP and MgATP. Consistent activations were also achieved with MgCl2 and MgATP, the magnesium effect being abolished by ethylenediaminetetraacetic acid and adenosine triphosphate. Cholesterol ester hydrolase was activated twofold by free calcium and Ca2+/calmodulin; this latter effect was blocked by the chelator ethylene-glycol-bis(beta-aminoethyl ether)N,N,N',N'-tetraacetic acid and the calmodulin antagonist trifluoperazine. The phosphatase inhibitors pyrophosphate and glycerophosphate led to marked and dose-dependent increases in esterase activity, whereas okadaic acid elicited no effect. Furthermore, pyrophosphate and okadaic acid did not change the increases in enzyme activity promoted by Ca2+, Ca2+/calmodulin, Mg2+ and MgATP. Cholesterol ester hydrolase was inactivated in a concentration-dependent manner by nonspecific alkaline phosphatases. In cAMP-dependent protein kinase/cAMP- or Ca2+/calmodulin-activated microsomes, a time-dependent loss of activation in cholesteryl oleate hydrolysis was caused by alkaline phosphatase. These findings suggest that microsomal cholesterol ester hydrolase is activated through cAMP and Ca2+/calmodulin phosphorylation, whereas enzyme deactivation is dependent on phosphatase action.