Hepatocytes in primary monolayer culture treated with taurolithocholate showed distinct ultrastructural changes localized primarily to the bile canalicular membrane. These alterations comprised disturbance and proliferation of tight junctions, dilatation of the canaliculi, loss of microvilli, thickening of the pericanalicular ectoplasm, and bizarre lamellar transformations of canaliculi. In freeze-fracture replicas the lamellae projecting into the canalicular lumen were found to be devoid of intramembranous particles. Localization by the use of filipin of cholesterol in plasma membranes of taurolithocholate affected hepatocytes revealed an extensive accumulation of cholesterol in membranes of dilated canaliculi, and also in outpouchings of the contiguous membrane in the ultimate vicinity. Furthermore, a pronounced segregation of cholesterol-rich membrane material into the lumen of dilated canaliculi and into enlargements of the intercellular space could be observed in thin sections. In contrast, a total absence of cholesterol was noted in the lamellar projections of the bizarre transformed canaliculi. The reliability of these findings and their consequences for the mechanism of taurolithocholate-induced cholestasis are discussed and it is suggested that the incorporation of cholesterol into the canalicular membrane reflects only one aspect of the cholestatic effect of taurolithocholate. An additional aspect seems to comprise the dislocation of membrane bound proteins and perhaps other membrane components. This is probably caused by independent mechanisms.