The integrity of cell membranes is maintained by a balance between the amount of cholesterol and the amounts of unsaturated and saturated fatty acids in phospholipids. This balance is maintained by membrane-bound transcription factors called sterol regulatory element-binding proteins (SREBPs) that activate genes encoding enzymes of cholesterol and fatty acid biosynthesis. To enhance transcription, the active NH(2)-terminal domains of SREBPs are released from endoplasmic reticulum membranes by two sequential cleavages. The first is catalyzed by Site-1 protease (S1P), a membrane-bound subtilisin-related serine protease that cleaves the hydrophilic loop of SREBP that projects into the endoplasmic reticulum lumen. The second cleavage, at Site-2, requires the action of S2P, a hydrophobic protein that appears to be a zinc metalloprotease. This cleavage is unusual because it occurs within a membrane-spanning domain of SREBP. Sterols block SREBP processing by inhibiting S1P. This response is mediated by SREBP cleavage-activating protein (SCAP), a regulatory protein that activates S1P and also serves as a sterol sensor, losing its activity when sterols overaccumulate in cells. These regulated proteolytic cleavage reactions are ultimately responsible for controlling the level of cholesterol in membranes, cells, and blood.