The expressed catalytic activity of liver microsomal HMG CoA reductase, the limiting enzyme in cholesterol synthesis, is reversibly diminished by phosphorylation in vitro. In intact hepatocytes the expressed activity of HMG CoA reductase is enhanced by incubation of cells with insulin, and diminished by treatment with glucagon or with mevalonate. In the latter situations the level of total reductase activity falls following initial inactivation (phosphorylation) of the enzyme. This observation suggested that the phosphorylated form of HMG CoA reductase is more sensitive to proteolysis. HMG CoA reductase is a 97,000 dalton (97 K) integral protein of the endoplasmic reticulum with a cytosolic domain that includes the catalytic site and serine residues that may be reversibly phosphorylated. In vitro the Ca2+-activated proteolytic enzyme, calpain, generates two catalytically-active fragments: a membrane bound 62 K and a soluble 53 K form of the enzyme which are quantified by specific immunoblot procedures. Cleavage of the native 97 K HMG CoA reductase is enhanced by pretreatment (inactivation) of microsomes with ATP (Mg2+) and liver reductase kinase compared to microsomes pretreated with protein phosphatase. This is reflected in a loss of 97 K reductase and an increase in the soluble 53 K form of the enzyme. Degradation of HMG CoA reductase in hepatocytes is partially blocked by lysosomotropic agents and insulin. A steady state model for the turnover of proteins subject to reversible phosphorylation has been developed which recognizes fractional degradative rate constants for the phosphorylated and dephosphorylated species.