The importance of cholesterol ester synthesis by acyl CoA:cholesterol acyltransferase (ACAT) enzymes in intestinal and hepatic cholesterol metabolism has been unclear. We now demonstrate that ACAT2 is the major ACAT in mouse small intestine and liver, and suggest that ACAT2 deficiency has profound effects on cholesterol metabolism in mice fed a cholesterol-rich diet, including complete resistance to diet-induced hypercholesterolemia and cholesterol gallstone formation. The underlying mechanism involves the lack of cholesterol ester synthesis in the intestine and a resultant reduced capacity to absorb cholesterol. Our results indicate that ACAT2 has an important role in the response to dietary cholesterol, and suggest that ACAT2 inhibition may be a useful strategy for treating hypercholesterolemia or cholesterol gallstones.