Mitochondrial cholesterol 27-hydroxylase (CYP27A1) plays an important role in the maintenance of intracellular cholesterol homeostasis. Cholesterol delivery to the mitochondrial inner membrane is believed to be a rate-limiting step for the "acidic" pathway of bile acid synthesis. This work reports that proteinase K treatment of mitochondria markedly increases CYP27A1 specific activity. With endogenous mitochondrial cholesterol, treatment with proteinase K increased CYP27A1 specific activity by 5-fold. Moreover, the addition of the exogenous cholesterol in beta-cyclodextrin plus proteinase K treatment increased the specific activity by 7-fold. Kinetic studies showed that the increased activity was time-, proteinase K-, and substrate concentration-dependent. Proteinase K treatment decreased the apparent K(m) of CYP27A1 for cholesterol from 400 to 150 microM. Using this new assay, we found that during rat hepatocyte preparation and cell culture, mitochondria gradually lose CYP27A1 activity compared with mitochondria freshly isolated from rat liver tissue.