In humans, sterol 27-hydroxylase (CYP27A1) deficiency leads to cholesterol deposition in tendons and vasculature. Thus, in addition to its role in bile acid synthesis, where it converts cholesterol to 27-hydroxycholesterol (27-OHC), CYP27A1 may also be atheroprotective. Cyp27A1-deficient (Cyp27A1(-/-)) mice were crossed with apolipoprotein E (apoE)-deficient mice. Cyp27A1(+/+)/apoE(-/-) [ApoE-knockout (KO)], Cyp27A1(+/-)/apoE(-/-) heterozygous (het), and Cyp27A1(-/-)/apoE(-/-) [double-knockout (DKO)] mice were challenged with a Western diet (WD) for 3 and 6 mo. ApoE-KO mice fed a chow diet or a WD were used as the control. The severity of atherosclerosis in DKO mice was reduced 10-fold. Compared with the control, the DKO mice had no 27-OHC, total plasma cholesterol and low-density lipoprotein and very low density lipoprotein (LDL/VLDL) concentrations were reduced 2-fold, and HDL was elevated 2-fold. Expression of hepatic CYP7A1, CYP3A, and CYP8B1 were 5- to 10-fold higher. 3-Hydroxy-3-methyl-glutaryl-CoA reductase (HMGR) activity increased 4-fold. Fecal cholesterol was increased. In contrast, het mice fed a WD developed accelerated atherosclerosis and severe skin lesions, possibly because of reduced reverse cholesterol transport due to diminished 27-OHC production. CYP27A1 activity is involved in the control of cholesterol homeostasis and development of atherosclerosis with a distinct gene dose-dependent effect.