The yeast ERG4 gene encodes sterol C-24(28) reductase which catalyzes the final step in the biosynthesis of ergosterol. Deletion of ERG4 resulted in a complete lack of ergosterol and accumulation of the precursor ergosta-5,7,22,24(28)-tetraen-3beta-ol. An erg4 mutant strain exhibited pleiotropic defects such as hypersensitivity to divalent cations and a number of drugs such as cycloheximide, miconazole, 4-nitroquinoline, fluconazole, and sodium dodecyl sulfate. Similar to erg6 mutants, erg4 mutants are sensitive to the Golgi-destabilizing drug brefeldin A. Enzyme activity measurements with isolated subcellular fractions revealed that Erg4p is localized to the endoplasmic reticulum. This view was confirmed in vivo by fluorescence microscopy of a strain expressing a functional fusion of Erg4p to enhanced green fluorescent protein. We conclude that ergosterol biosynthesis is completed in the endoplasmic reticulum, and the final product is supplied from there to its membranous destinations.