The first step in cholesterol gallstone disease is precipitation of cholesterol crystals in bile. In gallbladder bile. cholesterol is normally solubilized together with bile salts and phospholipids to form mixed micellar structures. When cholesterol in bile is in excess, vesicles (i.e. phospholipid-cholesterol globular structures: liquid crystals) form which become supersaturated in cholesterol. Early aggregation and precipitation of cholesterol molecules into submicroscopic nuclei occurs from these supersaturated vesicles. This crucial step is followed by precipitation and agglomeration of cholesterol crystals which then become visible at light microscopy. Here we describe the mechanism of cholesterol crystallization and its modulation in vivo and in vitro. Recent advances on the role of ursodeoxycholate as an agent preventing the precipitation of cholesterol crystals in bile will be highligthed.