Our bodies use cholesterol to make all our sex hormones. Bio-identical hormones are derived from a cholesterol-like substance found in wild yams or soybeans, however this is not the reason they are called "natural". This plant “cholesterol” is tweaked in the lab in order to achieve the exact chemical structure of hormones produced in the body. Since bio-identical hormones are chemically identical to our own hormones, the body cannot distinguish between them.