The protein kinase C (PKC) family of Ca2+ and/or lipid-activated serine-threonine protein kinases is implicated in the pathogenesis of obesity and insulin resistance. We recently reported that protein kinase Cβ (PKCβ), a calcium-, diacylglycerol-, and phospholipid-dependent kinase, is critical for maintaining whole body triglyceride homeostasis. We now report that PKCβ deficiency has profound effects on murine hepatic cholesterol metabolism, including hypersensitivity to diet-induced gallstone formation. The incidence of gallstones increased from 9% in control mice to 95% in PKCβ-/- mice. Gallstone formation in the mutant mice was accompanied by hyposecretion of bile acids with no alteration in fecal bile acid excretion, increased biliary cholesterol saturation and hydrophobicity indices, as well as hepatic p42/44MAPK activation, all of which enhance susceptibility to gallstone formation. Lithogenic diet-fed PKCβ -/- mice also displayed decreased expression of hepatic cholesterol-7α-hydroxylase (CYP7A1) and sterol 12α-hydroxylase (CYP8b1). Finally, feeding a modified lithogenic diet supplemented with milk fat, instead of cocoa butter, both increased the severity of and shortened the interval for gallstone formation in PKCβ-/- mice and was associated with dramatic increases in cholesterol saturation and hydrophobicity indices. Taken together, the findings reveal a hitherto unrecognized role of PKCβ in fine tuning diet-induced cholesterol and bile acid homeostasis, thus identifying PKCβ as a major physiological regulator of both triglyceride and cholesterol homeostasis.