Previous studies have demonstrated that both the 105,000 X g soluble supernatant (S105) and microsomal membranes from rat liver are required for the enzymatic conversion of squalene to cholesterol (Scallen, T.J., Dean, W.J., and Schuster, M.W. (1968) J. Biol. Chem. 243, 5202). It was postulated that S105 contained a noncatalytic carrier protein which was required for this enzymatic process (Scallen, T. J., Schuster, M.W., and Dhar, A.K. (1971) J. Biol. Chem. 246, 224). Later evidence demonstrated that S105 contained at least two proteins which were required for the microsomal conversion of squalene to cholesterol (Scallen, T.J., Srikantaiah, M.V., Seetharam, B., Hansbury, E., and Gavey, K.L. (1974) Fed. Proc. 33, 1733). This article describes the purification and properties of the first of these soluble proteins, sterol carrier protein1 (SCP1), which has been purified 575-fold from rat liver S105. While SCP1 specifically activated the enzymatic conversion of squalene to lanosterol by liver microsomal membranes, SCP1 possessed no capacity to activate the microsomal conversion of [3H-A14,4-dimethyl-delta8-cholestenol to C27 sterols or of [3H]7-dehydrocholesterol to cholesterol. Lanosterol was identified by silicic acid chromatography and mass spectrometry. The formation of lanosterol was a hyperbolic function of the concentration of SCP1 present in the incubation mixture. The Km observed for SCP1 was similar to the Km observed for squalene. The formation of lanosterol from squalene required FAD. The addition of phosphatidylserine increased enzymatic activity; however, phosphatidylserine was not required for this conversion. SCP1 was catalytically inactive when it was incubated with [3H] squalene and cofactors in the absence of microsomes. Substantial evidence supports the hypothesis that SCP1 operates as a noncatalytic carrier protein for the water-insoluble substrate squalene in the enzymatic conversion of squalene to lanosterol by liver microsomal membranes.