ATP-binding cassette transporter A1 (ABCA1) mediates the rate-limiting step in high density lipoprotein (HDL) particle formation, and its expression is regulated primarily by oxysterol-dependent activation of liver X receptors. We previously reported that ABCA1 expression and HDL formation are impaired in the lysosomal cholesterol storage disorder Niemann-Pick disease type C1 and that plasma HDL-C is low in the majority of Niemann-Pick disease type C patients. Here, we show that ABCA1 regulation and activity are also impaired in cholesteryl ester storage disease (CESD), caused by mutations in the LIPA gene that result in less than 5% of normal lysosomal acid lipase (LAL) activity. Fibroblasts from patients with CESD showed impaired up-regulation of ABCA1 in response to low density lipoprotein (LDL) loading, reduced phospholipid and cholesterol efflux to apolipoprotein A-I, and reduced α-HDL particle formation. Treatment of normal fibroblasts with chloroquine to inhibit LAL activity reduced ABCA1 expression and activity, similar to that of CESD cells. Liver X receptor agonist treatment of CESD cells corrected ABCA1 expression but failed to correct LDL cholesteryl ester hydrolysis and cholesterol efflux to apoA-I. LDL-induced production of 27-hydroxycholesterol was reduced in CESD compared with normal fibroblasts. Treatment with conditioned medium containing LAL from normal fibroblasts or with recombinant human LAL rescued ABCA1 expression, apoA-I-mediated cholesterol efflux, HDL particle formation, and production of 27-hydroxycholesterol by CESD cells. These results provide further evidence that the rate of release of cholesterol from late endosomes/lysosomes is a critical regulator of ABCA1 expression and activity, and an explanation for the hypoalphalipoproteinemia seen in CESD patients.