In a previous study using the J774 macrophage foam cells, we quantitated the accumulation of unesterified (free) cholesterol derived from cholesteryl ester hydrolysis in lysosomes, after phagocytic uptake of cholesteryl ester droplets. In the present study, we examined whether the accumulation of free cholesterol in lysosomes leads to the formation of cholesterol monohydrate crystals by analyzing the lipid composition of low density lysosome fractions isolated from cholesteryl ester-loaded macrophages after a 24-h incubation. Phase diagrams of the constituent lipids in the lipid-filled lysosomes predicted the formation of cholesterol monohydrate crystals. The formation of cholesterol monohydrate crystals was observed in cholesteryl ester-loaded macrophages after a 48-h incubation by polarizing light microscopy. The crystals had a density of 1.04 g/ml and the morphology of cholesterol monohydrate crystals with an acute edge angle of about 80 degrees. The crystals appeared as needles as well as plates and melted only when heated to greater than 85 degrees C. The physical properties of these crystals are characteristic of cholesterol monohydrate. In our studies, crystal formation was observed even when cells had active acyl-CoA:cholesterol acyltransferase or when cholesterol efflux was stimulated. Electron microscopy and acid phosphatase cytochemistry of lysosomes in cholesteryl ester-loaded cells confirmed that cholesterol crystal formation occurred within lipid-loaded lysosomes. Time-lapse video microscopic studies revealed that most of the cells containing cholesterol monohydrate crystals not only remain viable but also have the capacity to translocate single crystals within cells. The data demonstrate that lysosomal accumulation of free cholesterol in macrophages after phagocytic uptake and hydrolysis of cholesteryl ester droplets leads to the formation of cholesterol monohydrate crystals within lipid-filled lysosomes. Such a process may lead to deposition of free cholesterol and cholesterol monohydrate crystals in macrophage foam cells during the progression of atherosclerosis.