The let-767 gene encodes a protein that is similar to mammalian steroid enzymes that are responsible for the reduction of 17-beta hydroxysteroid hormones. Caenorhabditis elegans is incapable of the de novo synthesis of cholesterol. Therefore, this free-living nematode must extract cholesterol from its environment and modify it to form steroid hormones that are necessary for its survival. C. elegans is unable to survive in the absence of supplemental cholesterol, and is therefore sensitive to cholesterol limitation. We show that a mutation in let-767 results in hypersensitivity to cholesterol limitation, supporting the hypothesis that LET-767 acts on a sterol derivative. Furthermore, let-767 mutants exhibit defects in embryogenesis, female reproduction and molting. Although ecdysone is the major molting hormone in insects, there is as yet no evidence for ecdysone synthesis in C. elegans, suggesting that a different hormone is required for molting in C. elegans. Our results suggest that LET-767 modifies a sterol hormone that is required both for embryogenesis and for later stages of development.