The current paper demonstrates that cholesterol and its hydroxylated derivative, 25-hydroxycholesterol (25-HC), inhibit cholesterol synthesis by two different mechanisms, both involving the proteins that control sterol regulatory element-binding proteins (SREBPs), membrane-bound transcription factors that activate genes encoding enzymes of lipid synthesis. Using methyl-beta-cyclodextrin as a delivery vehicle, we show that cholesterol enters cultured Chinese hamster ovary cells and elicits a conformational change in SREBP cleavage-activating protein (SCAP), as revealed by the appearance of a new fragment in tryptic digests. This change causes SCAP to bind to Insigs, which are endoplasmic reticulum retention proteins that abrogate movement of the SCAP.SREBP complex to the Golgi apparatus where SREBPs are normally processed to their active forms. Direct binding of cholesterol to SCAP in intact cells was demonstrated by showing that a photoactivated derivative of cholesterol cross-links to the membrane domain of SCAP. The inhibitory actions of cholesterol do not require the isooctyl side chain or the Delta5-double bond of cholesterol, but they do require the 3beta-hydroxyl group. 25-HC is more potent than cholesterol in eliciting SCAP binding to Insigs, but 25-HC does not cause a detectable conformational change in SCAP. Moreover, a photoactivated derivative of 25-HC does not cross-link to SCAP. These data imply that cholesterol interacts with SCAP directly by inducing it to bind to Insigs, whereas 25-HC works indirectly through a putative 25-HC sensor protein that elicits SCAP-Insig binding.