The major aim of the current investigation was to define whether essential fatty acid (EFA) deficiency modifies the intrahepatic metabolism and biliary output of sterols in rats. EFA-deficient diet caused an impoverishment in linoleic, arachidonic, and docosahexaenoic acids, and a marked enrichment in the eicosatrienoic acid of the plasma, liver, and hepatic microsomes. During a short term of biliary drainage, a significant decline of the pool size of biliary sterols was noted in EFA-deficient rats compared with control rats. To assess the biosynthesis of biliary components, the common bile duct was cannulated and the pool size depleted (24 hours). Subsequently, a 6-hour bile collection disclosed a significant decrease (nmoles/min/g liver) in bile acids (4.8 +/- 0.3 vs. 8.4 +/- 0.7, P < .005), cholesterol (0.26 +/- 0.01 vs. 0.34 +/- 0.02, P < .05), and phospholipids (1.49 +/- 0.11 vs. 2.82 +/- 0.32, P < .005) in EFA-deficient rats compared with controls (n = 6/group). When cholesterogenesis was measured by the incorporation of [14C]acetate and 3H20 into cholesterol, using liver slices, it was also found to be significantly (P < .001) reduced in EFA-deficient rats. The activity of hepatic 3-hydroxy-3-methylglutaryl coenzyme A reductase, the rate-limiting enzyme in cholesterol biosynthesis, was consistently lower (80 percent, P < .001) in EFA-deficient rats. In parallel experiments, the direct measurement of microsomal acyl-CoA:cholesterol acyl-transferase (ACAT) showed a decrease averaging 52 percent (P < .001). This is in striking contrast to the elevated activity (157 percent, P < .005) of cholesterol 7 alpha-hydroxylase, the rate-limiting enzyme in bile acid biosynthesis. Current experiments also suggest that the enzyme regulation involving phosphorylation and dephosphorylation is modified by EFA deficiency. Among the structural alterations observed in the morphology of hepatocytes in EFA-deficient rats, the lumen of bile canaliculi was reduced in size. These results underline the importance of EFA in the major mechanisms involved in the maintenance of hepatocyte sterol balance.