Upon incubation of free fat cells for 3 h with labelled mevalonate, more than 90% of the radioactivity of the non-saponifiable material was found in the squalene fraction and less than 10% in the methyl sterol and cholesterol fractions. About 25, 30 and 65% of the cholesterol counts were found respectively in VLDL, LDL, or HDL added to the medium while none of the newly synthesized squalene was released into the lipoproteins. The results indicate that adipose tissue squalene can originate from local synthesis. It is not released from the cells into the medium, but can contribute to local cholesterol synthesis in both rapidly and slowly exchangeable cholesterol pools of adipose tissue.