The neurodegenerative disease Niemann-Pick Type C2 (NPC2) results from mutations in the NPC2 (HE1) gene that cause abnormally high cholesterol accumulation in cells. We find that purified NPC2, a secreted soluble protein, binds cholesterol specifically with a much higher affinity (K d ؍ 30 -50 nM) than previously reported. Genetic and biochemical studies identified single amino acid changes that prevent both cholesterol binding and the restoration of normal cholesterol levels in mutant cells. The amino acids that affect cholesterol binding surround a hydrophobic pocket in the NPC2 protein structure, identifying a candidate sterol-binding location. On the basis of evolutionary analysis and mutagenesis, three other regions of the NPC2 protein emerged as important, including one required for efficient secretion.point mutants ͉ secretion ͉ protein evolution N iemann-Pick Type C (NPC) is an autosomal-recessive disorder characterized by progressive ataxia, dystonia, and dementia (1). Substantial cell death, particularly in the cerebellum, accounts for some of the symptoms. At the cellular level, mutant cells accumulate cholesterol and other lipids in aberrant compartments with features of late endosomes and lysosomes, and the normal homeostatic response to this excess cholesterol is abolished (2-4).Our understanding of the molecular basis of this disease has progressed substantially over the last several years, because the two genes damaged by NPC mutations, NPC1 and NPC2, have been identified (5-7). NPC1 encodes a multiple-membranespanning protein containing sequences similar to the sterol cleavage activating protein (SCAP) regulator of cholesterol metabolism and the receptor Patched, a transducer of the Hedgehog family of protein signals. Mutations in NPC1 are responsible for Ϸ95% of the NPC cases (8). The exact role that NPC1 plays in maintaining normal levels of cholesterol in late endosomes and lysosomes remains mysterious. Even less is known about the NPC2 [human epididymis (HE1)] protein, the loss of which is responsible for 5% of NPC cases.NPC2 is a small secreted glycoprotein originally identified as a transcript enriched in the HE1 (9). The porcine HE1 homolog was reported to bind cholesterol with micromolar affinity (K d ϭ 2.3 M; ref. 10), information that was crucial in identifying HE1 as a candidate npc2 gene product (7). However, the similarity between the reported K d and the solubility of cholesterol in aqueous solution (5 M, Merck Index) warrants reexamination of the strength and specificity of this interaction. If the binding is meaningful, NPC2 activity could be altered when cholesterol is bound, thus serving as a sensor of cholesterol levels, accessibility, or location. Alternatively, NPC2 could process or transport cholesterol. Resolving these questions is crucial for determining why cholesterol accumulates in people lacking functional NPC2 protein and for designing rational treatment strategies.In this report, we combine in vitro binding experiments, genetic analysis, a quantitative cell-based ...