We tested the hypothesis that progesterone, an inhibitor of cholesterol esterification in liver microsomes, increases biliary cholesterol output by increasing the availability of cholesterol. Initial bile samples of 20 min were obtained from acute bile fistula rats after seven daily doses of progesterone (5 to 55 mg per kg of body weight). Biliary cholesterol output correlated with the doses of progesterone, r = 0.64 (p < 0.005). A 100% increment in biliary cholesterol output was obtained with progesterone doses of 30 to 55 mg per kg of body weight. Under these conditions, biliary phospholipid output increased 50% (p < 0.02), but bile salt output remained normal. The relationship between biliary cholesterol and phospholipids as a function of bile salt output was studied after acute depletion of the bile salt pool. A rectangular hyperbola was the best curve fitting for the experimental data in control and progesterone-injected rats. In the physiological range of bile salt output, between 60 and 120 nmoles per gm per min, progesterone-injected rats secreted 100% more biliary cholesterol than did controls. The calculated theoretical maximal cholesterol and phospholipid outputs were significantly increased in progesterone-injected animals. Serum and hepatic cholesterol pool, free and ester fractions, remained normal. The acyl-CoA: cholesterol acyltransferase reaction was 30% inhibited in hepatic microsomes of progesteroneinjected rats, (p < 0.05). The changes in biliary phospholipids and cholesterol output produced by progesterone were rapidly reversed by either 0.5% cholesterol feeding or 2 mg per kg of body weight ethynyl estradiol injection. These manipulations simultaneously produced a 100% increment in the microsomal acyl-CoA: cholesterol acyltransferase activity (p < 0.005) and increased 4-fold the concentration of hepatic cholesterol esters. This experimental model suggests a functional interrelationship between biliary cholesterol output and the rate at which the liver esterifies cholesterol.