Cholesterol homoeostasis is critical for cell viability and proliferation. The SREBP (sterol regulatory element-binding protein) pathway is crucial for the maintenance of cholesterol homoeostasis. This pathway is controlled by cholesterol and cholesterol-derived oxysterols. J774 cells cannot convert desmosterol into cholesterol, a defect resulting from the absence of mRNA for sterol-Delta24-reductase. Using J774 cells, we addressed the capacity of desmosterol to replace cholesterol in sustaining cell proliferation and regulating the SREBP pathway. J774 cells were able to grow indefinitely after the virtually total replacement of cholesterol by desmosterol (J774-D cells). Inhibition of sterol biosynthesis with lovastatin suppressed J774-D cell proliferation. Desmosterol prevented this effect, but its analogue, cholest-5,22-trans-dien-3beta-ol, did not. Addition of desmosterol inhibited processing of SREBP-1 and -2 and also reduced the expression of SREBP-targeted genes. As occurs in cholesterol-containing cells, 25-hydroxycholesterol was more potent than desmosterol or cholesterol in suppressing these processes. Moreover, desmosterol addition enhanced the expression of Abca1 and Srebf1c, two LXR (liver X receptor)-targeted genes. To test the ability of endogenously produced desmosterol to regulate gene expression, J774-D cells were pretreated with lovastatin to inhibit sterol biosynthesis. After removal of the inhibitor the expression of SREBP-targeted genes decreased and that of an LXR-targeted gene increased, reaching control levels. Our results demonstrate that the virtually complete replacement of cholesterol by desmosterol is compatible with cell growth and the functioning of the SREBP pathway. In these cells, desmosterol suppresses SREBP processing and targeted gene expression, and it is especially effective activating LXR-targeted genes.