Niemann-Pick type C2 disease (NP-C2) is a fatal hereditary disorder of unknown etiology characterized by defective egress of cholesterol from lysosomes. Here we show that the disease is caused by a deficiency in HE1, a ubiquitously expressed lysosomal protein identified previously as a cholesterol-binding protein. HE1 was undetectable in fibroblasts from NP-C2 patients but present in fibroblasts from unaffected controls and NP-C1 patients. Mutations in the HE1 gene, which maps to chromosome 14q24.3, were found in NP-C2 patients but not in controls. Treatment of NP-C2 fibroblasts with exogenous recombinant HE1 protein ameliorated lysosomal accumulation of low density lipoprotein-derived cholesterol.