The conversion of cholesterol to 7alpha-hydroxycholesterol catalyzed by cytochrome P450 7A1 (CYP7A1) initiates the major pathway for cholesterol elimination in mammals. In the present work we focused on identification of determinants of the CYP7A1 substrate specificity inside the active site using a homology model with a novel P450-fold, site-directed mutagenesis, and substrate-binding and kinetic studies. Forty-one mutants, encompassing twenty-six amino acid residues, were generated and characterized, and of these, seven residues appear to determine cholesterol binding in the active site. In addition, four cholesterol derivatives were used as active site probes in the wild type and the seven mutant enzymes, and the spectral binding constants and products were analyzed. It was concluded that Asn288 in the I helix plays a key role in the P450-cholesterol contacts by hydrogen bonding to the steroid 3beta-hydroxyl, while Val280 and Ala284 are beside and the Trp283 is above the steroid nucleus orienting the cholesterol molecule. Leu360 and Ala358 between the K helix and the beta1-4 strand and Leu485 in the beta4 sheet-turn appear to define the size of the active site over the heme pyrrole ring A, thus limiting the orientation and size of the substrate at the steroid A ring. Additionally, the A358V mutant was found to form two new products, one being 7beta-hydroxycholesterol. Our data indicate that a tight fit of cholesterol in the enzyme active site is in part responsible for the high efficiency of cholesterol turnover by CYP7A1.