A method of reencapsulating native and reduced-cholesterol butteroil within natural membrane material and proteins of milk such that milkfat globule size and function resembled native cream as closely as possible was developed and evaluated. By replacing the native butteroil with reduced-cholesterol butteroil, an approximate cholesterol reduction of 80% was possible. Milkfat globule membrane material and proteins associated with the lipid phase were evaluated indirectly by measuring light scattering and phosphodiesterase activity in centrifuged reformulated raw cream. Functional stability of cream was measured by evaluating emulsion stability. Optimum conditions for reformulation using ultrasound included ratios of 1:1:1 (butteroil:buttermilk/aqueous phase:skim milk), emulsification time of 2.0 minutes for a 15 ml sample, and emulsification temperature of 42°C. Optimized conditions were used in scale-up reformulation of 750 ml samples replacing ultrasound with homogenization. Treatments included both native butteroil and reduced-cholesterol reformulated creams and unwashed natural cream as the control. Reformulation conditions included phase ratios of 1:1:1 (butteroil:buttermilk/aqueous phase:skim milk), homogenization temperature of 42°C, two-stage homogenization pressures of 500 psig/2000 psig, and product passed through the homogenizer twice. Much more membrane material and proteins became reenveloped into the cream phase with the homogenization process than with ultrasound. Stability of raw homogenized creams over 4 days at 2°C was evaluated by light scattering, phosphodiesterase, and emulsion stability. Overall, there were significant differences among treatments for light scattering and phosphodiesterase assays but not for emulsion stability. Significant differences among days within treatments indicated that the raw creams did change significantly over the time of storage. No differences were found among replications within treatments. Churn time, as a measure of functional stability, was measured on the first day after reformulation. No differences among treatments were observed. Practical applications of this reenvelopment method may include the use of butteroil in a wider range of reformulated dairy products including fluid milk, ice creams, and cheese products. Development of any full-fat reduced-cholesterol product will require a reformulation step unless cholesterol is directly removed from the food. / Master of Science