In mammals, the esterification of sterols by ACAT plays a critical role in eukaryotic lipid homeostasis. Using the predominant isoform of the yeast ACAT-related enzyme family, Are2p, as a model, we targeted phylogenetically conserved sequences for mutagenesis in order to identify functionally important motifs. Deletion, truncation, and missense mutations implicate a regulatory role for the amino-terminal domain of Are2p and identified two carboxyl-terminal motifs as required for catalytic activity. A serine-to-leucine mutation in the (H/Y)SF motif (residues 338-340), unique to sterol esterification enzymes, nullified the activity and stability of yeast Are2p. Similarly, a tyrosine-to-alanine change in the FYxDWWN motif of Are2p (residues 523-529) produced an enzyme with decreased activity and apparent affinity for oleoyl-CoA. Mutagenesis of the tryptophan residues in this motif completely abolished activity. In human ACAT1, mutagenesis of the corresponding motifs (residues 268-270, and 403-409, respectively) also nullified enzymatic activity. On the basis of their critical roles in enzymatic activity and their sequence conservation, we propose that these motifs mediate sterol and acyl-CoA binding by this class of enzymes.