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The objective of this work was to develop a cell-free system for studying the transfer of cholesterol from lysosomes to membrane acceptor particles. The methods involved: 1) loading of CHO cells at 15 degrees C with [3H]cholesteryl oleate-reconstituted LDL, such that it accumulated undegraded in endosomes; 2) homogenization of cells, followed by preparation of an endosome-lysosome donor fraction; 3) incubation of the donor fraction at 37 degrees C in a defined cytosol-like medium containing acceptor particles of egg phosphatidylcholine small unilamellar vesicles (PC-SUV); and 4) measurement of cholesteryl oleate (CO) hydrolysis and transfer of the resulting free cholesterol (FC) to vesicles. During cell-free incubation, LDL-loaded endosomes fused with lysosomes leading to the lysosomal hydrolysis of LDL cholesteryl ester. Maximal hydrolysis of approximately 50% was achieved in 4-8 h. This hydrolysis was inhibited by lysosomotropic agents, proton ionophores, or removal of ATP and GTP from the medium, indicating that it took place in sealed lysosomes. In the absence of PC-SUV, the release of LDL-derived FC from lysosomes was “< or =” 10%/8 h. This was increased to a maximum of 25-30%/8 h at 3 mg/ml of PC-SUV. In contrast, the release of undegraded CO was 5-15%/8 h and not stimulated by PC-SUV, suggesting that the transfer of FC to PC-SUV was selective and not due to the uncontrolled release of lysosomal contents. In comparisons between CHO-K1 cells and sterol transport-defective CHO(2-2) cells, lysosomes from the latter cell were 35% less efficient as donors of cholesterol for transfer to egg phosphatidylcholine small unilamellar vesicles, indicating that these methods reproduce an important aspect of sterol trafficking in cells. In addition, this result suggests that the mutation in CHO(2-2) has a direct effect on the lysosomes of these cells.