Sterol 27-hydroxylase, the mitochondrial enzyme that catalyzes the first step in oxidation of the sterol side chain in hepatic bile acid synthesis, also catalyzes the synthesis of 27-hydroxycholesterol from cholesterol. We have developed a high performance liquid chromatography (HPLC) assay for this enzyme, using either endogenous or exogenous cholesterol as substrate and cholesterol oxidase to convert 27-hydroxycholesterol to 4-cholesten-27-hydroxy-3-one. The alpha,beta-unsaturated ketone product was separated by normal phase HPLC and quantitated via absorption at 240 nm. Addition of cholesterol dissolved in 2-hydroxypropyl-beta-cyclodextrin to the assay mixture raised the enzyme activity of rat liver mitochondria more than 10-fold. 2-Hydroxypropyl-beta-cyclodextrin itself was partially effective, apparently by making more endogenous cholesterol accessible to the enzyme. Availability of cholesterol to the enzyme limits synthesis of 27-hydroxycholesterol in rat liver. Using our assay to simultaneously determine the activities of cholesterol 7 alpha-hydroxylase and cholesterol 27-hydroxylase in rat liver homogenates, we demonstrated that the two enzymes are separately regulated.