Cholesterol plays an essential role in cell membrane synthesis and in cell growth and differentiation. In mammalian cells, cholesterol can be synthesized from acetate precursors or taken up from dietary or exogenous sources. The major catabolic route for disposal of cholesterol involves conversion into excretable bile acids. The maintenance of cholesterol homeostasis is influenced and carefully controlled by multiple feedback mechanisms. The key regulatory targets of these feedback mechanisms are 3-hydroxy-3-methylglutaryl coenzyme A (HMG-CoA) reductase in cholesterol biosynthesis, the low-density lipoprotein (LDL) receptor in cholesterol uptake, and cholesterol 7 alpha-hydroxylase in cholesterol catabolism. The elucidation of regulatory mechanisms in cholesterol metabolism has been greatly facilitated by the discovery of a new class of lipid-lowering drugs, the HMG-CoA reductase inhibitors. In addition to proving therapeutically useful in the treatment of hypercholesterolemia, these drugs have revealed novel regulatory steps in cholesterol metabolism and several new targets for future drug development. This manuscript reviews recent developments in the cholesterol biosynthetic pathway and the regulatory mechanisms that maintain cholesterol homeostasis.