Chloroquine inhibits the incorporation of [14C]acetate into sterols at a concentration of 10 microM or more in mouse L cells but has no effect on fatty acid synthesis and CO2 production from the same substrate even at a 10-fold higher concentration of the drug. The site of inhibition is distal to the formation of mevalonate since chloroquine also inhibits [14C]mevalonate metabolism to sterols and does not decrease the activity of 3-hydroxy-3-methylglutaryl coenzyme A reductase (EC 1.1.1.34) or the incorporation of [14C]acetate into the total nonsaponifiable lipids. Analyses by thin layer and high pressure liquid chromatography of the nonsaponifiable lipid fraction from cultures incubated with chloroquine show an accumulation of radioactivity in the region of squalene oxide. Identification of the radiolabeled lipid as squalene oxide has been established by: (a) its co-migration with the authentic squalene oxide standard; (b) its conversion into squalene glycol by acid hydrolysis; and (c) its further metabolism to desmosterol when chloroquine is removed from the medium. Addition of chloroquine (12.5-50 microM) to 20,000 X g supernatant fractions of mouse liver homogenates inhibits the incorporation of [14C]mevalonolactone into cholesterol and lanosterol, with corresponding increases of [14C]squalene oxides, in a concentration-dependent manner. It appears, therefore, that chloroquine inhibits the enzymatic step catalyzed by 2,3-oxidosqualene-lanosterol cyclase (EC 5.4.99.7). Incubation of cell cultures with chloroquine (50 microM) arrests cell growth and causes cell death after 1-3 days. However, simultaneous incubation of chloroquine with either cholesterol or lanosterol prevents cell death and permits cell growth. Uptake of chloroquine is not affected by exogenous sterols since intracellular chloroquine concentrations are the same in cells grown with or without added sterols. The cytotoxicity of chloroquine, under our experimental conditions, must, therefore, be due primarily to its inhibition of sterol synthesis. In addition to its well known effect on protein catabolism, chloroquine has been found to inhibit protein synthesis. The significance of these findings concerning the use of chloroquine in studying the regulation of 3-hydroxy-3-methylglutaryl coenzyme A reductase activity is discussed.