Peroxisomes isolated from rat liver were incubated with [3H]squalene and [3H]mevalonate and the subsequent incorporation of radioactivity into cholesterol studied. The isolated lipids became labeled after incubation with both precursors. In contrast to findings with microsomes, trypsin and detergent treatment of peroxisomes did not influence the rate of cholesterol synthesis. In addition, the luminal content of peroxisomes could alone mediate this synthetic process. Upon treatment of rats with various inducers of peroxisomes and of the endoplasmic reticulum, as well as upon feeding with cholesterol and cholestyramine, large differences in the pattern of in vitro incorporation of [3H]mevalonate into the cholesterol of peroxisomes and microsomes were observed. Injection of this precursor also resulted in high initial labeling of peroxisomal cholesterol in vivo. These experiments indicate that cholesterol synthesis may also occur in peroxisomes.