Oxysterols regulate cholesterol homeostasis through liver X receptor (LXR; cholesterol-lowering)- and sterol regulatory element-binding protein (SREBP; cholesterol-raising)-mediated signaling pathways. Previously we reported that the hypocholesterolemic agent LY295427 (4α-allylcholestan-3α-ol) reverses oxysterol-mediated suppression of SREBP processing. We now report that LY295427 increases expression of insulin-induced gene-1 (INSIG-1) and restores SREBP processing in cells treated with oxysterols. In cells overexpressing the INSIG-1 gene, by contrast, SREBP processing is suppressed and oxysterol regulation is disrupted. SREBP processing is not restored by addition of LY295427, but is restored by increasing the levels of SREBP cleavage-activating protein (SCAP). These findings suggest that the INSIG-1 protein alters sterol balance by modulating SREBP processing jointly with SCAP. To test whether the action of oxysterols on SREBP processing is mediated through endogenous INSIG-1 protein, we used RNAi to lower the expression of the INSIG-1 gene, and found that reduced INSIG-1 protein levels caused the loss of SREBP regulation by oxysterols. We conclude that: (i) INSIG-1 gene expression is suppressed by oxysterols; (ii) LY295427 treatment counters the suppressive effects of oxysterols on SREBP processing, resulting in the expression of the INSIG-1 gene; and (iii) INSIG-1 gene expression affects SREBP processing. Taken together, these data suggest that INSIG-1 plays a critical role in regulating cholesterol concentrations in the cell.