Subendothelial accumulation of extracellular liposomes rich in unesterified cholesterol has been described as an early feature of atherosclerosis induced by cholesterol feeding in rabbits. Beta-very-low-density lipoproteins, however, the presumed source of atherogenic lipid in this animal model, contain mostly esterified cholesterol. The purpose of this study was to test for the presence of extracellular neutral lipid deposits consistent with esterified cholesterol, by employing new electron microscopic techniques. Rabbits were fed 0.5% cholesterol, 5% butter for 0, 1, 2, and 4 weeks. The lipid-preserving ultrastructural techniques showed, in control and atherosclerotic rabbit arteries, neutral lipid droplets adherent to the endothelial luminal surface. After 1 to 2 weeks, subendothelial extracellular deposits of mostly membranous lipid appeared; these deposits contained variable amounts of neutral lipid. At the same time, cytoplasmic neutral lipid droplets appeared in smooth muscle cells and in a small number of subendothelial macrophagelike cells. After 4 weeks, monocytic infiltration and macrophage foam cell development were prominent, but abundant extracellular lipid deposits also were found. Therefore, in arteries of cholesterol-fed rabbits, deposition of membranous and neutral lipid in the extracellular space and neutral lipid accumulation in resident arterial cells are early and probably independent events, both occurring before monocytic infiltration of the arterial intima.