The last unidentified gene encoding an enzyme involved in ergosterol biosynthesis in Saccharomyces cerevisiae has been cloned. This gene, designated ERG27, encodes the 3-keto sterol reductase, which, in concert with the C-4 sterol methyloxidase (ERG25) and the C-3 sterol dehydrogenase (ERG26), catalyzes the sequential removal of the two methyl groups at the sterol C-4 position. We developed a strategy to isolate a mutant deficient in converting 3-keto to 3-hydroxy-sterols. An ergosterol auxotroph unable to synthesize sterol or grow without sterol supplementation was mutagenized. Colonies were then selected that were nystatin-resistant in the presence of 3-ketoergostadiene and cholesterol. A new ergosterol auxotroph unable to grow on 3-ketosterols without the addition of cholesterol was isolated. The gene (YLR100w) was identified by complementation. Segregants containing the YLR100w disruption failed to grow on various types of 3-keto sterol substrates. Surprisingly, when erg27 was grown on cholesterol- or ergosterol-supplemented media, the endogenous compounds that accumulated were noncyclic sterol intermediates (squalene, squalene epoxide, and squalene dioxide), and there was little or no accumulation of lanosterol or 3-ketosterols. Feeding experiments in which erg27 strains were supplemented with lanosterol (an upstream intermediate of the C-4 demethylation process) and cholesterol (an end-product sterol) demonstrated accumulation of four types of 3-keto sterols identified by GC/MS and chromatographic properties: 4-methyl-zymosterone, zymosterone, 4-methyl-fecosterone, and ergosta-7,24 (28)-dien-3-one. In addition, a fifth intermediate was isolated and identified by (1)H NMR as a 4-methyl-24, 25-epoxy-cholesta-7-en-3-one. Implications of these results are discussed.