In response to sterol deprivation, two sequential proteolytic cleavages release the NH 2 -terminal fragments of sterol regulatory element-binding proteins (SREBPs) from cell membranes. The fragments translocate to the nucleus where they activate genes involved in cholesterol and fatty acid metabolism. The SREBPs are bound to membranes in a hairpin fashion. The NH 2 -terminal and COOH-terminal domains face the cytoplasm, separated by two membrane spanning segments and a short lumenal loop. The first cleavage occurs at Site-1 in the lumenal loop. The NH 2 -terminal fragment is then released by cleavage at Site-2, which is believed to lie within the first transmembrane segment. Here, we use a novel cysteine panning method to identify the second cleavage site (Site-2) in human SREBP-2 as the Leu 484 -Cys 485 bond that lies at the junction between the cytoplasmic NH 2 -terminal fragment and the first transmembrane segment. We transfected cells with cDNAs encoding fusion proteins with single cysteine residues at positions to the NH 2 -terminal and COOH-terminal sides of cysteine 485. The NH 2 -terminal fragments were tested for susceptibility to modification with N ␣ -(3-maleimidylpropionyl)biocytin, which attaches a biotin group to cysteine sulfhydryls. Cysteines to the NH 2 -terminal side of cysteine 485 were retained on the NH 2 -terminal fragment, but cysteines to the COOH-terminal side of leucine 484 were lost. Leucine 484 is three residues to the COOH-terminal side of the tetrapeptide AspArg-Ser-Arg, which immediately precedes the first transmembrane segment and is required for Site-2 cleavage.Cells maintain cholesterol homeostasis through a feedback pathway that depends upon the regulated proteolytic processing of a pair of membrane-bound transcription factors, sterol regulatory element-binding proteins-1 and -2 (SREBP-1 and SREBP-2) 1 (reviewed in Ref. 1). Cells deprived of cholesterol process the SREBPs proteolytically to release the NH 2 -terminal domains which travel to the nucleus to activate transcription of genes that regulate several metabolic pathways: uptake of cholesterol and fatty acids (low density lipoprotein receptor and lipoprotein lipase) (1, 2), synthesis of cholesterol (3-hydroxy-3-methylglutaryl-CoA reductase, 3-hydroxy-3-methylglutaryl-CoA synthase, farnesyl diphosphate synthase, squalene synthase) (1, 3-5), synthesis of fatty acids (acetyl-CoA carboxylase, fatty acid synthase, stearoyl-CoA desaturase) (1, 2, 6, 7), and synthesis of triglycerides (glycerol-3-phosphate acyltransferase) (8). When cells accumulate sterols, proteolysis of the SREBPs is suppressed, nuclear SREBPs decline, and the transcription of the target genes is reduced. This regulation assures a steady supply of cholesterol and fatty acids while preventing their overaccumulation.SREBPs are unique among transcription factors because they are synthesized as membrane-bound precursors with three domains. The precursors are bound to the endoplasmic reticulum and nuclear envelope in a hairpin orientation (9). The cytoplasmic NH 2...