Bay o 2752 [N,N'-(1, 11-undecandiyl)bis(2,3-dihydro-2-methyl-1H-indole-1-carboxamide)] has been demonstrated in rats to inhibit intestinal cholesterol absorption. Studies were carried out in male Wistar rats to determine if the mechanism is inhibition of intestinal bile acid absorption or cholesterol esterification. Bay o 2752 did not alter intestinal bile acid absorption as measured by in vitro uptake of [14C]taurocholic acid into ileal everted sacs (0.01 and 1.0 mg/ml of Bay o 2752) or the biliary excretion of radioactivity after in vivo ileal perfusion of the bile acid and drug (1.0 mg/ml at 1.0 ml/min for 1 hr). Cholesterol esterification was determined by measurement of in vitro activity of acyl coenzyme A:cholesterol acyltransferase from hepatic microsomes and cholesterol ester hydrolase from pancreatic supernatant, and the in vivo lymphatic output of cholesteryl ester after intraduodenal cholesteryl infusion. Addition of Bay o 2752 (0.01-10 micrograms/ml) to hepatic microsomes produced a concentration-dependent decrease in acyl coenzyme A:cholesterol acyltransferase activity with an IC50 of 0.95 micrograms/ml. Cholesterol ester hydrolase activity was unaffected by the drug (1.0-100 micrograms/ml). Intraduodenal infusion of Bay o 2752 (10 mg/ml at 0.9 ml/hr for 8 hr) reduced markedly the flux of cholesterol from the intestinal lumen into the mesenteric lymph, especially the lymphatic output of the esterified form of both radioisotopically labeled and total cholesterol. These data suggest that Bay o 2752-induced reduction in intestinal cholesterol absorption results from its potent inhibitory effect on acyl coenzyme A:cholesterol acyltransferase activity.