The anhydrous milk fat ghee is one of the important sources of fat in the Indian diet. Our earlier studies showed that rats fed diets containing greater than 2.5 wt% of ghee had lower levels of serum cholesterol compared with rats fed diets containing groundnut oil. To evaluate the mechanism of the hypocholesterolemic effect of ghee, male Wistar rats were fed a diet containing 2.5 or 5.0 wt% ghee for a period of 8 weeks. The diets were made isocaloric with groundnut oil. Both native and ghee heated at 120 degrees C containing oxidized lipids were included in the diet. The ghee in the diet did not affect the 3-hydroxy-3-methylglutaryl coenzyme A (HMG CoA) reductase activity in the liver microsomes, but it significantly increased biliary excretion of cholesterol, bile acids, uronic acid, and phospholipids. The rats fed ghee had lower levels of cholesterol esters in the serum as well as in the intestinal mucosa. Both native and oxidized ghee influenced cholesterol metabolism. These results indicate that supplementation of diets with ghee lipids would increase the excretion of bile constituents and lower serum cholesterol levels.