To explore the nature of retinyl ester synthesis by liver microsomes, membranes prepared from rat or cat liver were incubated under various conditions with [3H] retinol dispersed in dimethyl sulfoxide. When [3H]retinol, buffer, and microsomes were incubated together (basal conditions), some [3H]retinol esterification was consistently observed. However, the rate of esterification could be increased 6- to 11-fold by addition of either palmitoyl-CoA (100 microM) or a fatty acyl CoA-generating system. To determine whether the fatty acid used to esterify [3H]retinol under basal conditions might be derived from an endogenous pool of fatty acyl-CoA associated with the microsomal preparation, microsomes were pretreated at pH 7.4 with 0.5 M hydroxylamine, a reagent that reacts with coenzyme A thioesters to form hydroxamates. This pretreatment reduced the basal reaction by 69%. However, hydroxylamine-treated microsomes still retained acyltransferase activity, as shown by a 24- to 40-fold increase in retinyl ester synthesis after addition of palmitoyl-CoA. When microsomes were incubated with both [3H]retinol and [14C]palmitoyl-CoA of known specific radioactivities, the ratio of 14C to 3H in newly synthesized retinyl palmitate was essentially equal to that of its putative substrates, indicating that [14C]palmitate did not undergo significant isotope dilution prior to acylation of [3H]retinol. These experiments provide direct evidence for retinol esterification catalyzed by a microsomal acyl-CoA:retinol acyltransferase and indirect evidence for a pool of fatty acyl-CoA in isolated liver microsomes that is available to react with [3H]retinol to form esterified retinol.