The critical steps in bile acid metabolism have remarkable differences between humans and mice. It is known that human cholesterol 7 alpha-hydroxylase, the enzyme catalyzing the rate-limiting step of bile acid synthesis, is more sensitive to bile acid suppression. In addition, hepatic bile acid export in humans is more dependent on the bile salt export pump (BSEP). To explore the molecular basis for these species differences, we analyzed the function of the ligand-binding domain (LBD) of human and murine farnesoid X receptor (FXR), a nuclear receptor for bile acids. We observed a strong interspecies difference in bile acid-mediated FXR function; in the coactivator association assay, chenodeoxycholate (CDCA) activated human FXR-LBD with 10-fold higher affinity and 3-fold higher maximum response than murine FXR-LBD. Consistently, in HepG2 cells human FXR-LBD increased reporter expression more robustly in the presence of CDCA. The basis for these differences was investigated by preparing chimeric receptors and by site-directed mutagenesis. Remarkably, the double replacements of Lys(366) and Val(384) in murine FXR (corresponding to Asn(354) and Ile(372) in human FXR) with Asn(366) and Ile(384) explained the difference in both potency and maximum activation; compared with the wild-type murine FXR-LBD, the double mutant gained 8-fold affinity and more than 250% maximum response to CDCA in vitro. This mutant also increased reporter expression to an extent comparable with that of human FXR-LBD in HepG2 cells. These results demonstrate that Asn(354) and Ile(372) are critically important for FXR function and that murine FXR can be "humanized" by substituting with the two corresponding residues of human FXR. Consistent with the difference in FXR-LBD transactivation, CDCA induced endogenous expression of human BSEP by 10-12-fold and murine BSEP by 2-3-fold in primary hepatocytes. This study not only provides the identification of critical residues for FXR function but may also explain the species difference in bile acids/cholesterol metabolism.