This study compares the side-chain cleavage of aqueous suspensions of cholesterol sulfate with the side-chain cleavage of cholesterol sulfate which is incorporated into phospholipid vesicles. Three different cholesterol desmolase systems are examined: (1) the membrane-bound cholesterol side-chain cleavage system present in inner mitochondrial membranes isolated from bovine adrenal mitochondria; (2) a soluble, lipid-depleted, reconstituted side-chain cleavage system prepared from cytochrome P-450scc, adrenodoxin and adrenodoxin reductase; (3) a membrane associated side-chain cleavage system prepared by adding phospholipid vesicles, prepared from adrenal mitochondrial, to the reconstituted system. Soluble cholesterol sulfate, in low concentration, is a good substrate for the lipid-depleted reconstituted side chain cleavage system. However, at concentrations above 2 μM, in the absence of phospholipids, the sterol sulfate appears to bind at a non-productive site on cytochrome P-450scc which leads to substrate inhibition. Phospholipids, while inhibiting the binding of cholesterol sulfate to the cytochrome, also appear to prevent non-productive binding of the sterol sulfate to the cytochrome. Thus the addition of phospholipids to the lipid-depleted enzyme system leads to an activation of side-chain cleavage of high concentrations of the sterol sulfate. Soluble cholesterol sulfate is a good substrate for both the native and reconstituted membrane-bound systems and no substrate inhibition is observed when the membrane bound enzyme systems are employed in the assay of side-chain activity. However, the cleavage of cholesterol sulfate, which is incorporated into phospholipid vesicles, by both membrane bound enzyme systems appears to be competitively inhibited by the phospholipids of the vesicles. The results of this study suggest that the regulation of the side-chain cleavage of cholesterol sulfate may be entirely different than the regulation of the side-chain cleavage of cholesterol, if cholesterol sulfate exists intracellularly as a soluble non-complexed substrate. If, on the other hand, cholesterol sulfate is present in the cell in lipid droplets as a complex with phospholipids, its metabolism may be under the same constraints as the side-chain cleavage of cholesterol.