Cellular cholesterol homeostasis is maintained through coordinated regulation of cholesterol synthesis, degradation, and secretion. Nuclear receptors for oxygenated cholesterol derivatives (oxysterols) are known to play key roles in the regulation of cholesterol homeostasis. We recently identified a sulfated oxysterol, 5-cholesten-3beta,25-diol 3-sulfate (25HC3S), that is localized to liver nuclei. The present study reports a biosynthetic pathway for 25HC3S in hepatocytes. Assays using mitochondria isolated from rats and sterol 27-hydroxylase (Cyp27A1) gene knockout mice indicated that 25-hydroxycholesterol (25HC) is synthesized by CYP27A1. Incubation of cholesterol or 25HC with mitochondrial and cytosolic fractions in the presence of 3'-phosphoadenosyl 5'-phosphosulfate resulted in the synthesis of 25HC3S. Real-time RT-PCR and Western blot analysis showed the presence of insulin-regulated hydroxycholesterol sulfotransferase 2B1b (SULT2B1b) in hepatocytes. 25HC3S, but not 25HC, decreased SULT2B1b mRNA and protein levels. Specific small interfering RNA decreased SULT2B1b mRNA, protein, and activity levels. These findings demonstrate that mitochondria synthesize 25HC, which is subsequently 3beta-sulfated to form 25HC3S.