Recent studies on the in vivo roles of the sterol regulatory element binding protein (SREBP) family indicate that SREBP-2 is more specific to cholesterogenic gene expression whereas SREBP-1 targets lipogenic genes. To define the molecular mechanism involved in this differential regulation, luciferase-reporter gene assays were performed in HepG2 cells to compare the transactivities of nuclear SREBP-1a, -1c, and -2 on a battery of SREBP-target promoters containing sterol regulatory element (SRE), SRE-like, or E-box sequences. The results show first that cholesterogenic genes containing classic SREs in their promoters are strongly and efficiently activated by both SREBP-1a and SREBP-2, but not by SREBP-1c. Second, an E-box containing reporter gene is much less efficiently activated by SREBP-1a and -1c, and SREBP-2 was inactive in spite of its ability to bind to the E-box. Third, promoters of lipogenic enzymes containing variations of SRE (SRE-like sequences) are strongly activated by SREBP-1a, and only modestly and equally by both SREBP-1c and -2. Finally, substitution of the unique tyrosine residue within the basic helix-loop-helix (bHLH) portion of nuclear SREBPs with arginine, the conserved residue found in all other bHLH proteins, abolishes the transactivity of all SREBPs for SRE, and conversely results in markedly increased activity of SREBP-1 but not activity of SREBP-2 for E-boxes. These data demonstrate the different specificity and affinity of nuclear SREBP-1 and -2 for different target DNAs, explaining a part of the mechanism behind the differential in vivo regulation of cholesterogenic and lipogenic enzymes by SREBP-1 and -2, respectively.