Determining how the regulation of cellular processes is impacted in cystic fibrosis (CF) is fundamental to understanding disease pathology and to identifying new therapeutic targets. In this study, unesterified cholesterol accumulation is observed in lung and trachea sections obtained from CF patients compared with non-CF tissues, suggesting an inherent flaw in cholesterol processing. An alternate staining method utilizing a fluorescent cholesterol probe also indicates improper lysosomal storage of cholesterol in CF cells. Excess cholesterol is also manifested by a significant increase in plasma membrane cholesterol content in both cultured CF cells and in nasal tissue excised from cftr^−/− mice. Impaired intracellular cholesterol movement is predicted to stimulate cholesterol synthesis, a hypothesis supported by the observation of increased de novo cholesterol synthesis in lung and liver of cftr^−/− mice compared with controls. Furthermore, pharmacological inhibition of cholesterol transport is sufficient to cause CF-like elevation in cytokine production in wild-type cells in response to bacterial challenge but has no effect in CF cells. These data demonstrate via multiple methods in both cultured and in vivo models that cellular cholesterol homeostasis is inherently altered in CF. This perturbation of cholesterol homeostasis represents a potentially important process in CF pathogenesis.