Biliary sludge is a collection of mucus, calcium bilirubinate, and cholesterol crystals that is usually recognized by characteristic echoes on ultrasonography. Its pathogenesis, clinical significance, and ultimate prognosis remain uncertain. We therefore studied the origin of biliary sludge ultrasonic echoes, using an ex vivo liver-gallbladder preparation, and determined the outcome of a group of patients identified to have gallbladder sludge by ultrasonography. Echoes were not generated by either an increase in the total solid concentration or by the graded addition of partially purified mucus glycoprotein. Cholesterol monohydrate crystals (>50 μm) mixed with mucus produced echoes that were indistinguishable from gallbladder sludge observed in patients. To determine the natural evolution of gallbladder sludge in patients, we prospectively followed 96 patients found to have biliary sludge for a mean of 37.8 mo by serial ultrasound scans every 6 mo. In 17 patients (17.7%) biliary sludge disappeared and did not recur for at least 2 years, in 58 patients (60.4%) biliary sludge disappeared and reappeared, and in 8 patients (8.3%) asymptomatic gallstones developed. There were 12 cholecystectomies performed: six were done for symptomatic gallstones (6.3%) and the other six for sludge associated with severe biliary pain attacks with or without recurrent acute pancreatitis. The finding of sludge represented precipitates being formed in bile. In some patients, it was a precursor form of gallstone disease.