We have cloned and characterized the 5'-flanking region of the gene encoding human squalene synthase. We report here the promoter activity of successively 5'-truncated sections of a 1 kilobase of this region by fusing it to the coding region of a luciferase reporter gene. DNA segments of 200 base pairs (bp) 5' to the transcription start site, as determined by primer extension analysis, show a strong promoter effect on the expression of the luciferase chimeric gene and a high response to the presence of sterols when transiently transfected into the human hepatoma cell line HepG2 or to the hamster-derived CHO-K1 cells. An approximately 50-fold induction of luciferase activity, in the absence of sterols, was observed in transiently transfected HepG2 cells for fusion constructs containing sections of 200, 459, and 934 bp of the putative human squalene synthase promoter. Loss of promoter activity and response to sterols was localized to a 69-bp section located 131 nucleotides 5' to the transcription start site. Sequence analysis of this region showed that it contained a sterol regulatory element 1 (SRE-1) previously identified in other sterol regulated genes (Smith, J. R., Osborne, T. F., Brown, M. S., Goldstein, J. L., and Gil, G. (1988). J. Biol. Chem. 263, 18480-18487) and two potential NF-1 binding sites. Additional CCAAT box, SRE-1 element, and two Sp1 sites were identified 3' to this section. Sequences within this 69-bp DNA, including the SRE-1 cis-acting element, show strong binding to the purified nuclear transcription factor ADD1 (Tonzonoz, P., Kim, J. B., Graves, R. A., and Spiegelman B. M. (1993) Mol. Cell Biol. 13, 4753-4759) by mobility shift assay and footprinting analyses.