Cholesterol accumulation in an aberrant endosomal/lysosomal compartment is the hallmark of Niemann-Pick type C (NPC) disease. To gain insight into the etiology of the NPC compartment, we studied a novel Chinese hamster ovary cell mutant that was identified through a genetic screen and phenocopies the NPC1 mutation. We show that the M87 mutant harbors a mutation in a gene distinct from the NPC1 and HE1/NPC2 disease genes. M87 cells have increased total cellular cholesterol with accumulation in an aberrant compartment that contains LAMP-1, LAMP-2, and NPC1, but not CI-MPR, similar to the cholesterol-rich compartment in NPC mutant cells. We demonstrate that low-density lipoprotein receptor activity is increased 3-fold in the M87 mutant, and likely contributes to accumulation of excess cholesterol. In contrast to NPC1-null cells, the M87 mutant exhibits normal rates of delivery of endosomal cholesterol to the endoplasmic reticulum and to the plasma membrane. The preserved late endosomal function in the M87 mutant is associated with the presence of NPC1-containing multivesicular late endosomes and supports a role for these multivesicular late endosomes in the sorting and distribution of cholesterol. Our findings implicate cholesterol overload in the formation of an NPC-like compartment that is independent of inhibition of NPC1 or HE1/NPC2 function.