The bile salt excretory pump (BSEP, ABCb11) is critical for ATP-dependent transport of bile acids across the hepatocyte canalicular membrane and for generation of bile acid-dependent bile secretion. Recent studies have demonstrated that the expression of this transporter is sensitive to the flux of bile acids through the hepatocyte, possibly at the level of transcription of the BSEP gene. To determine the mechanisms underlying the regulation of BSEP by bile acids, the promoter of the BSEP gene was cloned. The sequence of the promoter contained an inverted repeat (IR)-1 element (5'-GGGACA T TGATCCT-3') at base pairs -63/-50 consisting of two nuclear receptor half-sites organized as an inverted repeat and separated by a single nucleotide. This IR-1 element has been shown in several recent studies to serve as a binding site for the farnesoid X receptor (FXR), a nuclear receptor for bile acids. FXR activity requires heterodimerization with RXR alpha, and when bound by bile acids, the complex effectively regulates the transcription of several genes involved in bile acid homeostasis. Gel mobility shift assays demonstrated specific binding of FXR/RXR alpha heterodimers to the IR-1 element in the BSEP promoter. In HepG2 cells, co-transfection of FXR and RXR alpha is required to attain full transactivation of the BSEP promoter by bile acids. Two FXR transactivation-deficient mutants (an AF-2 deletion and a W469A point mutant) failed to transactivate, indicating that the effect of bile acids is FXR-dependent. Further, mutational analysis confirms that the FXR/RXR alpha heterodimer activates transcription through the IR-1 site in the human BSEP promoter. These results demonstrate a mechanism by which bile acids transcriptionally regulate the activity of the bile salt excretory pump, a critical component involved in the enterohepatic circulation of bile acids.