Sterols exert a profound influence on numerous cellular processes, playing a crucial role in both health and disease. However, comprehending the effects of sterol dysfunction on cellular physiology is challenging. Consequently, numerous processes affected by impaired sterol biosynthesis still elude our complete understanding. In this study, we made use of yeast strains that produce cholesterol instead of ergosterol and investigated the cellular response mechanisms on the transcriptome as well as the lipid level. The exchange of ergosterol for cholesterol caused the downregulation of phosphatidylethanolamine and phosphatidylserine and upregulation of phosphatidylinositol and phosphatidylcholine biosynthesis. Additionally, a shift towards polyunsaturated fatty acids was observed. While the sphingolipid levels dropped, the total amounts of sterols and triacylglycerol increased, which resulted in 1.7-fold enlarged lipid droplets in cholesterol-producing yeast cells. In addition to internal storage, cholesterol and its precursors were excreted into the culture supernatant, most likely by the action of ABC transporters Snq2, Pdr12 and Pdr15. Overall, our results demonstrate that, similarly to mammalian cells, the production of non-native sterols and sterol precursors causes lipotoxicity in K. phaffii, mainly due to upregulated sterol biosynthesis, and they highlight the different survival and stress response mechanisms on multiple, integrative levels.