Cholesterol is an abundant lipid in eukaryotic membranes, implicated in numerous structural and functional capacities. Here, we have investigated the mechanism by which cholesterol affects secretory granule biogenesis in vivo using Dhcr7^-/- and Sc5d^-/- mouse models of the human diseases, Smith-Lemli-Opitz syndrome (SLOS) and lathosterolosis. These homozygous-recessive multiple-malformation disorders are characterized by the functional absence of one of the last two enzymes in the cholesterol biosynthetic pathway, resulting in the accumulation of precursors. Cholesterol-deficient mice exhibit a significant decrease in the numbers of secretory granules in the pancreas, pituitary and adrenal glands. Moreover, there was an increase in morphologically aberrant granules in the exocrine pancreas of Dhcr7^-/- acinar cells. Regulated secretory pathway function was also severely diminished in these cells, but could be restored with exogenous cholesterol. Sterol precursors incorporated in artificial membranes resulted in decreased bending rigidity and intrinsic curvature compared with cholesterol, thus providing a cholesterol-mediated mechanism for normal granule budding, and an explanation for granule malformation in SLOS and lathosterolosis.