Micellar cholesterol uptake and secretion were investigated in the human intestinal cell line CaCo-2 following depletion of apical membrane sphingomyelin. The addition of exogenous sphingomyelinase, which hydrolysed 60% of prelabelled sphingomyelin, resulted in a 50% decrease in the uptake of cholesterol from bile salt micelles. The flux of membrane cholesterol into the cell by the hydrolysis of membrane sphingomyelin decreased the rate of cholesterol synthesis by 43% and inhibited hydroxymethylglutaryl-CoA reductase activity by 54%. Moreover, the rate of cholesterol esterification was increased 4-fold. Total cellular cholesterol mass was unchanged by the addition of sphingomyelinase; however, cholesteryl esters increased by 50% and the amount of unesterified cholesterol decreased significantly. The basolateral secretion of cholesterol mass was also decreased following sphingomyelin hydrolysis. Human pancreatic juice was found to contain neutral sphingomyelinase activity which required taurocholate for full expression. The presence of neutral sphingomyelinase activity was also documented in membranes prepared from CaCo-2 cells and in whole homogenates from human duodenal biopsies. The data suggest that the amount of sphingomyelin present in the apical membrane of the intestinal absorptive cell regulates cholesterol uptake from bile salt micelles. Sphingomyelinase activity within intestinal cells and in pancreatic juice could alter the sphingomyelin content of brush-border membranes of small intestinal absorptive cells and thus regulate the amount of cholesterol absorbed by the gut.