We showed previously that the intracellular transport of sphingolipids (SLs) is altered in SL storage disease fibroblasts, due in part to the secondary accumulation of free cholesterol. In the present study we examined the mechanism of cholesterol elevation in normal human skin fibroblasts induced by treatment with SLs. When cells were incubated with various natural SLs for 44 h, cholesterol levels increased 25-35%, and cholesterol esterification was reduced. Catabolism of the exogenous SLs was not required for elevation of cholesterol because (i) a non-hydrolyzable and a degradable SL analog elevated cellular cholesterol to similar extents, and (ii) incubation of cells with various SL catabolites, including ceramide, had no effect on cholesterol levels. Elevated cholesterol was derived primarily from low density lipoproteins (LDL) and resulted from up-regulation of LDL receptors induced by cleavage of the sterol regulatory element-binding protein-1. Upon SL treatment, cholesterol accumulated with exogenous SLs in late endosomes and lysosomes. These results suggest a model in which excess SLs present in endocytic compartments serve as a "molecular trap" for cholesterol, leading to a reduction in cholesterol at the endoplasmic reticulum, induction of sterol regulatory element-binding protein-1 cleavage, and up-regulation of LDL receptors.