Apolipoprotein E (apoE) secreted by macrophages in the artery wall exerts an important protective effect against the development of atherosclerosis, presumably through its ability to promote lipid efflux. Previous studies have shown that increases in cellular free cholesterol levels stimulate apoE transcription in macrophages and adipocytes; however, the molecular basis for this regulation is unknown. Recently, Taylor and colleagues [Shih, S. J., Allan, C., Grehan, S., Tse, E., Moran, C. & Taylor, J. M. (2000) J. Biol. Chem. 275, 31567-31572] identified two enhancers from the human apoE gene, termed multienhancer 1 (ME.1) and multienhancer 2 (ME.2), that direct macrophage- and adipose-specific expression in transgenic mice. We demonstrate here that the nuclear receptors LXRalpha and LXRbeta and their oxysterol ligands are key regulators of apoE expression in both macrophages and adipose tissue. We show that LXR/RXR heterodimers regulate apoE transcription directly, through interaction with a conserved LXR response element present in both ME.1 and ME.2. Moreover, we demonstrate that the ability of oxysterols and synthetic ligands to regulate apoE expression in adipose tissue and peritoneal macrophages is reduced in Lxralpha-/- or Lxrbeta-/- mice and abolished in double knockouts. Basal expression of apoE is not compromised in Lxr null mice, however, indicating that LXRs mediate lipid-inducible rather than tissue-specific expression of this gene. Together with our previous work, these findings support a central role for LXR signaling pathways in the control of macrophage cholesterol efflux through the coordinate regulation of apoE, ABCA1, and ABCG1 expression.