Multidrug resistance (MDR) P-glycoproteins were first recognized for their ability to catalyze ATP-dependent efflux of cytotoxic agents from tumor cells when overexpressed. Despite extensive study, little is known about the normal substrate(s) and normal cellular function of these proteins. In the accompanying manuscript (Metherall, J. E., Waugh, K., and Li, H. (1996) J. Biol. Chem. 271, 2627-2633), we demonstrate that progesterone inhibits cholesterol biosynthesis, causing the accumulation of a number of cholesterol precursors. In the current manuscript, we use several criteria to show that the progesterone receptor is not involved in this inhibition. Rather, we demonstrate that progesterone inhibits cholesterol biosynthesis by interfering with MDR activity. We show that a steroid hormone's ability to inhibit cholesterol biosynthesis is correlated with: 1) its general hydrophobicity and 2) its ability to inhibit MDR activity. The only exception to this finding is beta-estradiol, which is a more potent inhibitor of cholesterol biosynthesis than expected based solely on hydrophobicity and MDR inhibition. We further demonstrate that nonsteroidal inhibitors of MDR also inhibit cholesterol biosynthesis. Since MDR activity is required for esterification of LDL-derived cholesterol (P. DeBry and J. E. Metherall, submitted for publication), we investigated the relationship between these phenomena and show that inhibition of cholesterol esterification does not cause inhibition of cholesterol biosynthesis and that inhibition of cholesterol biosynthesis does not cause inhibition of cholesterol esterification. We propose a model in which MDR is required for transport of sterols from the plasma membrane to the endoplasmic reticulum (ER). Inhibiting this transport prevents cholesterol esterification and cholesterol biosynthesis by preventing sterol substrates from reaching ER-resident enzymes.