Mammalian cells use an exquisitely sensitive mechanism to control the amount of cholesterol and fatty acids in their membranes. This process relies on a feedback system that adjusts the rates of transcription of genes encoding the low density lipoprotein receptor and multiple enzymes in the cholesterol and fatty acid biosynthetic pathways. When cellular cholesterol levels are depleted, these genes are all transcribed in abundant amounts, and their transcription is repressed when sterols build up within the cell. Until recently, the mechanism of this regulation was elusive. How do cells sense the level of a membrane-embedded lipid such as cholesterol and how is this information transmitted to the nucleus where gene transcription is regulated? Answers are now beginning to emerge from the study of a newly discovered family of transcription-regulating proteins called sterol regulatory element binding proteins.