A new method for reconstituting acyl coenzyme A: cholesterol acyltransferase (ACAT) activity from either Chinese hamster ovary (CHO) or human fibroblast cell extracts into cholesterol-phosphatidylcholine liposomes is described. The method is rapid (less than 60 min) and easy to perform. The procedure involves solubilizing the cell extracts with deoxycholate followed by dilution into preformed liposomes. Ficoll gradient analysis demonstrated that, after reconstitution, almost all of the detectable ACAT activity co-migrated with the liposomes. Exogenous cholesterol in the liposomes was absolutely necessary for providing ACAT activity, but not for incorporation of the ACAT enzyme into the vesicle bilayer. Human fibroblast cell extracts prepared from cells grown in medium containing 10% fetal calf serum were found to contain a 10-fold higher microsomal ACAT activity compared to extracts from cells grown in 10% delipidated fetal calf serum. In contrast, when the ACAT activity from these extracts was measured using the reconstitution assay, there was no difference in the specific activities. These results support our previous work (Doolittle, G. M., and T. Y. Chang. 1982. Biochim. Biophys. Acta. 713: 529-537; and Chang, C. C. Y., et al. 1986. Biochemistry. 25: 1693-1699), and suggest that cholesterol regulates ACAT activity in CHO cells and human fibroblasts by mechanism(s) other than modulation of the amount of enzyme.