Previous studies of our group indicated that two types of cells are involved in the pathogenesis of atheroma. The one type, myocytes, are poor in acid esterase activity, store lipid droplets which they cannot hydrolyze and are transformed into foam cells. The other type, macrophages, are rich in this enzyme activity, can and do hydrolyze the esters with possible healing by fibrosis. In the present study the importance of acid esterase activity in experimental xanthoma in hyperlipidemic rabbits was studied. Perithelial cells of small blood vessels were found to be poor in acid esterase activity and to contain bulky lipid masses. With time, increasing numbers of cells with high enzyme activity were found mainly at a distance from the vessels. These cells, which mostly contained finely emulsified lipids are believed to be macrophages. Thus, in both atheroma and xanthoma, vessel wall cells take a "passive" part in formation of the lesion, while blood borne cells play a role in disposing of the lipid with eventual possibility of healing.