Esterification of cholesterol by acyl-CoA:cholesterol acyltransferase (ACAT) is a key element in maintaining cholesterol homeostasis in cells of higher animals. In the budding yeast, Saccharomyces cerevisiae, accumulation of ergosteryl esters accompanies entry into stationary phase and sporulation. We have determined that two genes in yeast, SAT1 and SAT2, encode isozymes of acyl-CoA:sterol acyltransferase (ASAT) which are functionally related to ACAT. The SAT1 isozyme is the major catalytic isoform, accounting for at least 65-75% of total ASAT activity. Targeted deletions of one or both genes do not compromise mitotic cell growth or spore germination. However, diploids that are homozygous for a SAT1 null mutation exhibit significantly reduced sporulation efficiency. Furthermore, a larger fraction of the sporulating diploids arrest after the first meiotic division. Human ACAT expressed in sat1 sat2 mutant cells can catalyze esterification of cholesterol and, to a lesser extent, ergosterol in vitro, but restores ergosteryl oleate formation in vivo to only approximately 8% of that catalyzed by yeast ASAT in wild-type cells.