The synthesis of cholesterol and fatty acids (FA) in the liver is independently regulated by SREBP-2 and SREBP-1c, respectively. Here, we genetically deleted Srebf-2 from hepatocytes and confirmed that SREBP-2 regulates all genes involved in cholesterol biosynthesis, the LDL receptor, and PCSK9; a secreted protein that degrades LDL receptors in the liver. Surprisingly, we found that elimination of Srebf-2 in hepatocytes of mice also markedly reduced SREBP-1c and the expression of all genes involved in FA and triglyceride synthesis that are normally regulated by SREBP-1c. The nuclear receptor LXR is necessary for Srebf-1c transcription. The deletion of Srebf-2 and subsequent lower sterol synthesis in hepatocytes eliminated the production of an endogenous sterol ligand required for LXR activity and SREBP-1c expression. These studies demonstrate that cholesterol and FA synthesis in hepatocytes are coupled and that flux through the cholesterol biosynthetic pathway is required for the maximal SREBP-1c expression and high rates of FA synthesis.