We previously identified stearoyl-CoA desaturase 2 (SCD2) as a new member of the family of genes that are transcriptionally regulated in response to changing levels of nuclear sterol regulatory element binding proteins (SREBPs) or adipocyte determination and differentiation factor 1 (ADD1). A novel sterol regulatory element (SRE) (5'-AGCAGATTGTG-3') identified in the proximal promoter of the mouse SCD2 gene is required for induction of SCD2 promoter-reporter genes in response to cellular sterol depletion (Tabor, D. E., Kim, J. B., Spiegelman, B. M., and Edwards, P. A. (1998) J. Biol. Chem. 273, 22052-22058). In this report, we demonstrate that this novel SRE is both present in the promoter of the SCD1 gene and is critical for the sterol-dependent transcription of SCD1 promoter-reporter genes. Two conserved cis elements (5'-CCAAT-3') lie 5 and 48 base pairs 3' of the novel SREs in the promoters of both the SCD1 and SCD2 murine genes. Mutation of either of these putative NF-Y binding sites attenuates the transcriptional activation of SCD1 or SCD2 promoter-reporter genes in response to cellular sterol deprivation. Induction of both reporter genes is also attenuated when cells are cotransfected with dominant-negative forms of either NF-Y or SREBP. In addition, we demonstrate that the induction of SCD1 and SCD2 mRNAs that occurs during the differentiation of 3T3-L1 preadipocytes to adipocytes is paralleled by an increase in the levels of ADD1/SREBP-1c and that the SCD1 and SCD2 mRNAs are induced to even higher levels in response to ectopic expression of ADD1/SREBP-1c. We conclude that transcription of both SCD1 and SCD2 genes is responsive to cellular sterol levels and to the levels of nuclear SREBP/ADD1 and that transcriptional induction requires three spatially conserved cis elements, that bind SREBP and NF-Y. Additional studies demonstrate that maximal transcriptional repression of SCD2 reporter genes in response to an exogenous polyunsaturated fatty acid is dependent upon the SRE and the adjacent CCAAT motif.