Stearoyl-CoA desaturase (SCD) is a microsomal enzyme required for the biosynthesis of oleate and palmitoleate, which are the major monounsaturated fatty acids of membrane phospholipids, triglycerides, and cholesterol esters. Two well characterized isoforms of SCD, SCD1 and SCD2, exist in the mouse. Most mouse tissues express SCD1 and 2 with the exception of the liver, which expresses mainly the SCD1 isoform. We found that asebia mice homozygous for a natural mutation of the gene for SCD1 (SCD-/-) are deficient in hepatic cholesterol esters and triglycerides despite the presence of normal activities of acyl-CoA:cholesterol acyltransferase and glycerol phosphate acyltransferase, the enzymes responsible for cholesterol ester and triglyceride synthesis, respectively, in the liver of these mice. Feeding diets supplemented with triolein or tripalmitolein to the SCD-/- mice resulted in an increase in the levels of 16:1 and 18:1 in the liver but failed to restore the 18:1 and 16:1 levels of the cholesterol ester and triglycerides to the levels found in normal mice. The SCD-/- mouse had very low levels of triglycerides in the VLDL and LDL lipoprotein fractions compared with the normal animal. Transient transfection of an SCD1 expression vector into Chinese hamster ovary cells resulted in increased SCD activity and esterification of cholesterol to cholesterol esters. Taken together, our observations demonstrate that the oleoyl-CoA and palmitoleyl-CoA produced by SCD1 are necessary to synthesize enough cholesterol esters and triglycerides in the liver and suggest that regulation of SCD1 activity plays an important role in mechanisms of cellular cholesterol homeostasis.