Lysosomal acid lipase (LAL) is essential for the hydrolysis of cholesterol esters and triglycerides that are delivered to the lysosomes via the low density lipoprotein receptor system, The deficiency of LAL is associated with cholesteryl ester storage disease (CESD) and Wolman's disease (WD), We cloned the human LAL cDNA and expressed the active enzyme in the baculovirus system, Two molecular forms (M(r) similar to 41,000 and similar to 46,000) with different glycosylation were found intracellularly, and similar to 24% of the M(r) similar to 46,000 form was secreted into the medium, Tunicamycin treatment produced only an inactive M(r) similar to 41,000 form, This result implicates glycosylation occupancy in the proper folding for active-site function, Catalytic activity was greater toward cis- than trans-unsaturated fatty acid esters of 4-methylumbelliferone and toward esters with 7-carbon length acyl chains, LAL cleaved cholesterol esters and mono-, tri-, and diglycerides. Heparin had a biphasic effect on enzymatic activity with initial activation followed by inhibition, Inhibition of LAL activity by tetrahydrolipstatin and diethyl p-nitrophenyl phosphate suggested the presence of active serines in binding/catalytic domain(s) of the protein, Site-directed mutagenesis at two putative active centers, GXSXG, showed that Ser(153) was important to catalytic activity, whereas Ser(99) was not and neither was the catalytic nucleophile, Three reported mutations (L179P, L336P, and Delta AG302 deletion) from CESD patients were created and expressed in the Sf9 cell system, None cleaved cholesterol esters, and L179P and L336P cleaved only triolein at similar to 4% of wild-type levels, These results suggest that mechanisms, in addition to LAL defects, may operate in the selective accumulation of cholesterol esters or triglycerides in CESD and WD patients.