Protein-protein interaction studies in the Saccharomyces cerevisiae ergosterol biosynthetic pathway suggest that enzymes in this pathway may act as an integrated multienzyme complex. The yeast sterol 3-ketoreductase (Erg27p) required for C-4 demethylation of sterols has previously been shown to also be required for the function of the upstream oxidosqualene cyclase/lanosterol synthase (Erg7p); thus, erg27 mutants accumulate oxidosqualenes as precursors rather than 3-ketosterones. In the present study, we have created various mutations in the ERG27 gene. These mutations include 5 C-terminal truncations, 6 internal deletions, and 32 point mutants of which 14 were obtained by site-directed mutagenesis and 18 by random mutagenesis. We have characterized these ERG27 mutations by determining the following: Erg27 and Erg7 enzyme activities, presence of Erg27p as determined by western immunoblots, ability to grow on various sterol substrates and GC sterol profiles. Mutations of the predicted catalytic residues, Y202F and K206A, resulted in the endogenous accumulation of 3-ketosterones rather than oxidosqualenes suggesting retention of Erg7 enzyme activity. This novel phenotype demonstrated that the catalytic function of Erg27p can be separated from its Erg7p chaperone ability. Other erg27 mutations resulted in proteins that were present, as determined by western immunoblotting, but unable to interact with the Erg7 protein. We also classify Erg27p as belonging to the SDR (short-chain dehydrogenase/reductase) family of enzymes and demonstrate the possibility of homo- or heterodimerization of the protein. This study provides new insights into the role of Erg27p in sterol biosynthesis.