Arterial smooth muscle cells are able to shift between two major differentiated states with distinct morphologic and functional properties, a contractile phenotype and a synthetic phenotype. Recently, it was demonstrated that contractile smooth muscle cells have numerous caveolae and that these specialized regions of the plasma membrane, to a large extent, are lost when the cells are modified into a synthetic phenotype. At the same time, the levels of the cholesterol-binding membrane protein caveolin remained unchanged and caveolin was redistributed from the cell surface to the perinuclear cytoplasm. In the present investigation, electron microscopy was used to study how smooth muscle cells of different phenotypes react to exposure to low-density lipoprotein and other lipoproteins both in vitro and in vivo. Our findings indicate that contractile cells (present early in primary culture and in the media of normal arterial walls) do not accumulate lipids in the cytoplasm and release excess cholesterol by means of plasma membrane caveolae. Extracellularly, the expelled lipids were built into membranous configurations and piled up as myelin-like deposits. In synthetic cells (formed after a few days in primary culture and as a response to arterial injury), lipids gathered in cytoplasmic droplets and increased amounts of membranous inclusions appeared in endosomes and lysosomes. On the other hand, no signs of extracellular discharge of lipids were detected. The results suggest that contractile smooth muscle cells use caveolin and caveolae to free themselves of excess lipoprotein-derived cholesterol and so manage to maintain a balance in the influx and efflux of cholesterol. Synthetic smooth muscle cells show a Golgi-like immunostaining for caveolin but have an insufficient capacity to use this protein to transport cholesterol to the plasma membrane and out of the cell. Cholesterol will then rather be esterified and collect in lipid droplets, eventually leading to foam cell formation if the uptake of lipoprotein continues.