Austrian botanist Friedrich Reinitzer, in 1888, discovered that cholesteryl acetate was a flowing liquid exhibiting optical properties previously attributed only to crystals. The discovery brought into question the belief of the time that only three states of matter could exist (liquid, solid, and gas). More recently, liquid crystals such as cholesteryl acetate have come to be used in cosmetics, wrist watches, thermometers, propane tank volume indicators, video displays, and in the "mood rings" of the late 1970s fad.

Referred to as "flussige Kristallen", Reinitzer described the new phenomenon of intermediate melting points for cholesteryl acetate and the related cholesteryl benzoate, falling between those of a turbid liquid state (anisotropic) and a transparent state (isotropic). Eighty years later, Radio Corporation of America (RCA) produced the first experimental liquid crystal display (LCD) based on this fourth state of matter. Whether contained in an advanced LCD or a 1970s mood ring, the thermotropic liquid crystals twist to various degrees in response to changes in temperature. With the change in the molecular arrangement, the wavelengths of light that are reflected or absorbed by cholesteryl acetate shift, resulting in a visible color change. As a temperature change is reversed, the liquid crystal reverts to its original color before the molecular rearrangement occurred. With naturally twisted nematic liquid crystals, applying an electric current will untwist them to varying degrees, depending on the voltage. Liquid crystals or mesophases, such as cholesteryl acetate, are used in LCDs because they behave predictably in the manner in which they control light passage with the application of different electric currents. Lyotropic liquid crystals occurring in the membranes of biological cells respond in phase transition based on chemical concentrations instead of temperature, magnetic, optic, or electric cues.

Synthesis of cholesteryl acetate from cholesterol involves heating the cholesterol in a solution of acetic acid and acetic anhydride. Although synthesized in the laboratory and on a commercial scale, cholesteryl acetate exists as a naturally occurring substance as well. For example, it is found as one of the three cholesterol esters composing the outer cuticle layer lipid coating of the brown dog tick (Rhipicephalus sanguineus).

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