Two groups of rats were pair-fed diets in which 36% of the calories were provided by either ethanol or dextrimaltose. After 60 days on these liquid diets, rats fed ethanol were significantly smaller than control rats fed dextrimaltose. Serum cholesterol levels in ethanol-fed animals were 20% higher than control rats. Cholestasis was not observed histologically, and serum alkaline phosphatase and bilirubin levels were the same in both groups. The livers of animals ingesting ethanol accumulated triglycerides and cholesterol. The increase in cholesterol was due to an increase in cholesteryl esters. The cholesterol content of liver microsomes, however, was unchanged by ethanol feeding. A small increase in unesterified cholesterol was observed in intestinal micro-somes prepared from animals receiving ethanol. Microsomal fatty acids in liver and intestine were unchanged by the ethanol diet. Chronic ingestion of ethanol in these animals failed to change acyl coenzyme A:cholesterol acyltransferase or 3-hydroxy-3-methylglutaryl-coenzyme A reductase activities in the intestine. In contrast, the activities of acyl coenzyme A:cholesterol acyltransferase and 3-hydroxy-3-methylglutaryl-coenzyme A reductase were significantly increased in the livers of rats receiving ethanol. Thus, the chronic ingestion of ethanol caused a marked accumulation of hepatic cholesteryl esters. This was associated with a significant increase in the activities of enzymes that control the rates of both cholesterol synthesis and cholesterol esterification in the liver. These observed changes in enzyme activities may contribute to the lipid accumulation which occurs in these livers. Chronic ethanol consumption did not alter cholesterol metabolism in the intestine.