The human multidrug resistance gene MDR3 encodes a P-glycoprotein that belongs to the ATP-binding cassette transporter family (ABCB4). MDR3 is a critical trans-locator for phospholipids across canalicular membranes of hepatocytes, evidenced by the fact that human MDR3 deficiencies result in progressive familial intrahepatic cholestasis type III. It has been reported previously that MDR3 expression is modulated by hormones, cellular stress, and xenobiotics. Here we show that the MDR3 gene is trans-activated by the farnesoid X receptor (FXR) via a direct binding of FXR/retinoid X receptor alpha heterodimers to a highly conserved inverted repeat element (a FXR response element) at the distal promoter (-1970 to -1958). In FXR trans-activation assays, both the endogenous FXR agonist chenodeoxycholate and the synthetic agonist GW4064 activated the MDR3 promoter. Deletion or mutation of this inverted repeat element abolished FXR-mediated MDR3 promoter activation. Consistent with these data, MDR3 mRNA was significantly induced by both chenodeoxycholate and GW4064 in primary human hepatocytes in time- and dose-dependent fashions. In conclusion, we demonstrate that MDR3 expression is directly up-regulated by FXR. These results, together with the previous report that the bile salt export pump is a direct FXR target, suggest that FXR coordinately controls secretion of bile salts and phospholipids. Results of this study further support the notion that FXR is a master regulator of lipid metabolism.