The amount of cholesterol that is synthesized in the liver is tightly regulated by dietary cholesterol levels. When dietary intake of cholesterol is high, synthesis is decreased and when dietary intake is low, synthesis is increased. However, cholesterol produced in other tissues is under no such feedback control. Cholesterol and similar oxysterols act as regulatory molecules to maintain healthy levels of cholesterol.

LDL receptors regulate the cellular transport of lipid rich low density lipoprotein (LDL) particles. One mechanism for regulating LDL receptor expression and controlling the expression of all the enzymes in the cholesterol biosynthetic pathway is dependent on Sterol-Sensitive Response Elements (SREs). SREs are found in the promoters of the genes coding for the enzymes of the cholesterol biosynthetic pathway and LDL receptors. Transcription factors important to activating SREs are Sterol Regulating Element Binding Proteins (SREBPs). Due to their ability to bind SREs, SREBPs play an instrumental role in cholesterol homeostasis. These transcription regulating proteins are bound by another protein called SREBP cleavage activating proteins (SCAPs). SCAPs bind to SREBPs in the endoplasmic reticulum (ER) where a regulatory domain within SCAP responds to the level of oxysterols present in the cell. When oxysterol levels are low the SCAP/SREBP complex moves to the Golgi where SREBP is cleaved and a portion of it can now move into the nucleus, where it interacts with SREs to promote gene expression. When oxysterol levels are high the SCAP/SREBP complex remains in the ER preventing cleaved SREBP from promoting gene expression.

SREBPs serve to regulate all 12 enzymes in the cholesterol biosynthetic pathway including the rate limiting enzyme HMGCoA reductase (HMGR). High dietary sterol levels acting on SCAP ultimately stop the maturation of SREBPs, resulting in the down regulation of key enzymes such as HMGR, thus, reducing the amount of cholesterol produced by the liver. Limiting cholesterol synthesis leads to a homeostatic response in which cells increase the density of LDL receptors on their surfaces. This increases the clearance rate of LDL particles from the plasma and reduces plasma LDL cholesterol and its related health risks. The decrease in cholesterol synthesis also promotes an increase of HDL, thus, clearing even more cholesterol from the plasma.