The crystalloid endoplasmic reticulum (ER), a specialized smooth ER of the compactin-resistant UT-1 cell, is composed of multiple membrane tubules packed together in a hexagonal pattern. This membrane contains large amounts of 3-hydroxy-3-methylglutaryl coenzyme A (HMG CoA) reductase, an integral membrane protein that enzymatically regulates endogenous cholesterol biosynthesis. Using morphological and immunocytochemical techniques, we have traced the sequence of events in the biogenesis of this ER when compactin-withdrawn UT-1 cells, which do not have a crystalloid ER, are incubated in the presence of compactin. After 15 h of incubation in the presence of compactin, many cells had profiles of ER cisternae that were juxtaposed to the nuclear envelope and studded with ribosomes on their outer membrane. Both the outer nuclear membrane and the ER membrane contained HMG CoA reductase; however, there was little or no detectable enzyme in rough ER that was free in the cytoplasm. With longer times of incubation in the presence of compactin, these cells had lamellar stacks of smooth ER next to the nuclear envelope that contained HMG CoA reductase. Coordinate with the appearance of the smooth ER, crystalloid ER appeared in the same cell. Often regions of continuity were found between the membrane of the smooth ER and the membrane of the crystalloid ER tubules. These studies suggest that HMG CoA reductase is synthesized along the outer nuclear membrane and in response to increased enzyme synthesis, a membrane emerges from the outer nuclear membrane as smooth ER cisternae, which then transforms into crystalloid ER tubules.