Abstract Squalene is a valuable natural substance with several biotechnological applications. In the yeast Saccharomyces cerevisiae, it is produced in the isoprenoid pathway as the first precursor dedicated to ergosterol biosynthesis. The aim of this study was to explore the potential of squalene epoxidase encoded by the ERG1 gene as the target for manipulating squalene levels in yeast. Highest squalene levels (over 1000 μg squalene per 109 cells) were induced by specific point mutations in ERG1 gene that reduced activity of squalene epoxidase and caused hypersensitivity to terbinafine. This accumulation of squalene in erg1 mutants did not significantly disturb their growth. Treatment with squalene epoxidase inhibitor terbinafine revealed a limit in squalene accumulation at 700 μg squalene per 109 cells which was associated with pronounced growth defects. Inhibition of squalene epoxidase activity by anaerobiosis or heme deficiency resulted in relatively low squalene levels. These levels were significantly increased by ergosterol depletion in anaerobic cells which indicated feedback inhibition of squalene production by ergosterol. Accumulation of squalene in erg1 mutants and terbinafine-treated cells were associated with increased cellular content and aggregation of lipid droplets. Our results prove that targeted genetic manipulation of the ERG1 gene is a promising tool for increasing squalene production in yeast. The paper is aimed at utilization of specific mutants with reduced squalene epoxidase activity for increasing production of squalene as a biotechnologically valuable substance in the yeast Saccharomyces cerevisiae.