Insig-1 and Insig-2 are closely related proteins of the endoplasmic reticulum (ER) that mediate feedback control of cholesterol synthesis by sterol-dependent binding to the following two membrane proteins: the escort protein Scap, thus preventing proteolytic processing of sterol regulatory element-binding proteins; and the cholesterol biosynthetic enzyme 3-hydroxy-3-methylglutaryl CoA reductase, thus inducing the ubiquitination and ER-associated degradation of the enzyme. Here, we report that the conserved Asp-205 in Insig-1, which abuts the fourth transmembrane helix at the cytosolic side of the ER membrane, is essential for its dual function. When Asp-205 was mutated to alanine, the mutant Insig-1 lost the ability to bind to Scap and, thus, was unable to suppress the cleavage of sterol regulatory element-binding proteins. The mutant Insig-1 was ineffective also in accelerating sterol-stimulated degradation of 3-hydroxy-3-methylglutaryl CoA reductase. Alanine substitution of the corresponding aspartic acid in Insig-2 produced the same dual defects. These studies identify a single amino acid residue that is crucial for the function of Insig proteins in regulating cholesterol homeostasis in mammalian cells.