This article aims to give an overview on the characterization, properties and regulation of enzymes, particularly the cytochrome (CYP) P450 enzymes, in the formation of bile acids from cholesterol. Bile acids are biologically active molecules that promote absorption of dietary lipids in the intestine and stimulate biliary excretion of cholesterol. Bile acids and oxysterols, formed from cholesterol, act as ligands to nuclear receptors regulating the expression of important genes in cholesterol homeostasis. Thus, the bioactivation of cholesterol into bile acids is crucial for regulation of cholesterol homeostasis. The primary human bile acids, cholic acid and chenodeoxycholic acid, are formed from cholesterol via several pathways involving many different enzymes. Many of these enzymes are cytochrome P450 (CYP) enzymes, introducing a hydroxyl group in the molecule. The "classic" pathway of bile acid formation starts with a 7alpha-hydroxylation of cholesterol by CYP7A1 in the liver. The "acidic" pathway starts with a hepatic or extrahepatic 27-hydroxylation by CYP27A1. There also exist some quantitatively minor pathways which may be of importance under certain conditions. Formation of cholic acid requires insertion of a 12alpha-hydroxyl group performed by CYP8B1. Oxysterols are precursors to bile acids, participate in cholesterol transport and are known to affect the expression of several genes in cholesterol homeostasis. Enzymes with capacity to form and metabolize oxysterols are present in liver and extrahepatic tissues. The enzymes, nuclear receptors and transcription factors involved in bile acid biosynthesis are potential pharmaceutical targets for the development of new drugs to control hypercholesterolemia and to prevent atherosclerosis and other diseases related to disturbed cholesterol homeostasis. The review will also discuss some inborn errors of bile acid biosynthesis and the recently acquired knowledge on the genetic defects underlying these diseases.