Acyl-CoA:cholesterol acyltransferase (ACAT) catalyzes esterification of cellular cholesterol. To investigate the role of ACAT-1 in atherosclerosis, we have generated ACAT-1 null (ACAT-1-/-) mice. ACAT activities were present in the liver and intestine but were completely absent in adrenal, testes, ovaries, and peritoneal macrophages in our ACAT-1-/- mice. The ACAT-1-/- mice had decreased openings of the eyes because of atrophy of the meibomian glands, a modified form of sebaceous glands normally expressing high ACAT activities. This phenotype is similar to dry eye syndrome in humans. To determine the role of ACAT-1 in atherogenesis, we crossed the ACAT-1-/- mice with mice lacking apolipoprotein (apo) E or the low density lipoprotein receptor (LDLR), hyperlipidemic models susceptible to atherosclerosis. High fat feeding resulted in extensive cutaneous xanthomatosis with loss of hair in both ACAT-1-/-:apo E-/- and ACAT-1-/-:LDLR-/- mice. Free cholesterol content was significantly increased in their skin. Aortic fatty streak lesion size as well as cholesteryl ester content were moderately reduced in both double mutant mice compared with their respective controls. These results indicate that the local inhibition of ACAT activity in tissue macrophages is protective against cholesteryl ester accumulation but causes cutaneous xanthomatosis in mice that lack apo E or LDLR.