The terms biliary sludge and cholesterol microlithiasis (hereafter referred to as microlithiasis) were originated from different diagnostic techniques and may represent different stages of cholesterol gallstone disease. Although the pathogenesis of biliary sludge and microlithiasis may be similar, microlithiasis could be preceded by biliary sludge, followed by persistent precipitation and aggregation of solid cholesterol crystals, and eventually, gallstone formation. Many clinical conditions are clearly associated with the formation of biliary sludge and microlithiasis, including total parenteral nutrition, rapid weight loss, pregnancy, organ transplantation, administration of certain medications, and a variety of acute and chronic illnesses. Numerous studies have demonstrated complete resolution of biliary sludge in approximately 40% of patients, a cyclic pattern of disappearing and reappearing in about 40%, and progression to gallstones in nearly 20%. Although only a minority of patients with ultrasonographic demonstration of biliary sludge develop gallstones, it is still a matter of controversy whether microlithiasis could eventually evolve to cholesterol gallstones. Biliary sludge and microlithiasis are asymptomatic in the vast majority of patients; however, they can cause biliary colic, acute cholecystitis, and acute pancreatitis. Biliary sludge and microlithiasis are most often diagnosed ultrasonographically and bile microscopy is considered the gold standard for their diagnosis. Specific measures to prevent the development of biliary sludge are not practical or cost-effective in the general population. Laparoscopic cholecystectomy offers the most definitive therapy on biliary sludge. Endoscopic sphincterotomy or surgical intervention is effective for microlithiasis-induced pancreatitis. Ursodeoxycholic acid can effectively prevent the recurrence of solid cholesterol crystals and significantly reduce the risk of recurrent pancreatitis.