We have identified a series of potent cholesteryl ester transfer protein (CETP) inhibitors, one member of which, torcetrapib, is undergoing phase 3 clinical trials. In this report, we demonstrate that these inhibitors bind specifically to CETP with 1:1 stoichiometry and block both neutral lipid and phospholipid (PL) transfer activities. CETP preincubated with inhibitor subsequently bound both cholesteryl ester and PL normally; however, binding of triglyceride (TG) appeared partially reduced. Inhibition by torcetrapib could be reversed by titration with both native and synthetic lipid substrates, especially TG-rich substrates, and occurred to an equal extent after long or short preincubations. The reversal of TG transfer inhibition using substrates containing TG as the only neutral lipid was noncompetitive, suggesting that the effect on TG binding was indirect. Analysis of the CETP distribution in plasma demonstrated increased binding to HDL in the presence of inhibitor. Furthermore, the degree to which plasma CETP shifted from a free to an HDL-bound state was tightly correlated to the percentage inhibition of CE transfer activity. The finding by surface plasmon resonance that torcetrapib increases the affinity of CETP for HDL by approximately 5-fold likely represents a shift to a binding state that is nonpermissive for lipid transfer. In summary, these data are consistent with a mechanism whereby this series of inhibitors block all of the major lipid transfer functions of plasma CETP by inducing a nonproductive complex between the transfer protein and HDL.