Acyl-CoA:cholesterol acyltransferase (ACAT) is a membrane-bound enzyme that produces cholesteryl esters intracellularly. Two ACAT genes (ACAT1 and ACAT2) have been identified. The expression of ACAT1 is ubiquitous, whereas that of ACAT2 is tissue restricted. Previous research indicates that ACAT1 may contain seven transmembrane domains (TMDs). To study ACAT2 topology, we inserted two different antigenic tags (hemagglutinin, monoclonal antibody Mab1) at various hydrophilic regions flanking each of its predicted TMDs, and expressed the recombinant proteins in mutant Chinese hamster ovary cells lacking endogenous ACAT. Each tagged ACAT2 was expressed in the endoplasmic reticulum as a single undegraded protein band and was at least partially active enzymatically. We then used cytoimmunofluorescence and protease protection assays to monitor the sidedness of the hemagglutinin and Mab1 tags along the ER membranes. The results indicated that ACAT2 contains only two detectable TMDs, located near the N terminal region. We also show that a conserved serine (S245), a candidate active site residue, is not essential for ACAT catalysis. Instead, a conserved histidine (H434) present within a hydrophobic peptide segment, may be essential for ACAT catalysis. H434 may be located at the cytoplasmic side of the membrane.