All but two genes involved in the ergosterol biosynthetic pathway in Saccharomyces cerevisiae have been cloned, and their corresponding mutants have been described. The remaining genes encode the C-3 sterol dehydrogenase (C-4 decarboxylase) and the 3-keto sterol reductase and in concert with the C-4 sterol methyloxidase (ERG25) catalyze the sequential removal of the two methyl groups at the sterol C-4 position. The protein sequence of the Nocardia sp NAD(P)-dependent cholesterol dehydrogenase responsible for the conversion of cholesterol to its 3-keto derivative shows 30% similarity to a 329-aa Saccharomyces ORF, YGL001c, suggesting a possible role of YGL001c in sterol decarboxylation. The disruption of the YGL001c ORF was made in a diploid strain, and the segregants were plated onto sterol supplemented media under anaerobic growth conditions. Segregants containing the YGL001c disruption were not viable after transfer to fresh, sterol-supplemented media. However, one segregant was able to grow, and genetic analysis indicated that it contained a hem3 mutation. The YGL001c (ERG26) disruption also was viable in a hem 1Delta strain grown in the presence of ergosterol. Introduction of the erg26 mutation into an erg1 (squalene epoxidase) strain also was viable in ergosterol-supplemented media. We demonstrated that erg26 mutants grown on various sterol and heme-supplemented media accumulate nonesterified carboxylic acid sterols such as 4beta, 14alpha-dimethyl-4alpha-carboxy-cholesta-8,24-dien-3be ta-ol and 4beta-methyl-4alpha-carboxy-cholesta-8,24-dien-3beta-o l, the predicted substrates for the C-3 sterol dehydrogenase. Accumulation of these sterol molecules in a heme-competent erg26 strain results in an accumulation of toxic-oxygenated sterol intermediates that prevent growth, even in the presence of exogenously added sterol.