The transcriptional activity of peroxisome proliferator-activated receptors (PPARs), and of nuclear hormone receptors in general, is subject to modulation by cofactors. However, most currently known co-activating proteins interact in a ligand-dependent manner with the C-terminal ligand-regulated activation function (AF)-2 domain of nuclear receptors. Since PPARalpha exhibits a strong constitutive transactivating function contained within an N-terminal AF-1 region, it can be speculated that a different set of cofactors might interact with this region of PPARs. An affinity purification approach was used to identify the peroxisomal enoyl-CoA hydratase/3-hydroxyacyl-CoA dehydrogenase (bifunctional enzyme, BFE) as a protein which strongly and specifically interacted with the N-terminal 92 amino acids of PPARalpha. Protein-protein interaction assays with the cloned BFE confirmed this interaction, which could be mapped to amino acids 307-514 of the BFE and the N-terminal 70 amino acids of PPARalpha. Moreover, transient transfection experiments in hepatoma cells revealed a 2.2-fold increase in the basal and ligand-stimulated transcriptional activity of PPARalpha in the presence of BFE. This stimulatory effect is preferentially observed for the PPARalpha isoform and it is significantly stronger (4.8-fold) in non-hepatic cells, which presumably express lower levels of endogenous BFE. Hence, the BFE represents the first known cofactor capable of activating the AF-1 domain of PPAR without requiring additional regions of this receptor. These data are compatible with a model whereby the PPAR-regulated BFE is able to modulate its own expression through an enhancement of the activity of PPARalpha, representing a novel peroxisomal-nuclear feed-forward regulatory loop.