LXRalpha and -beta are nuclear receptors that regulate the metabolism of several important lipids, including cholesterol and bile acids. Previously, we have proposed that LXRs regulate these pathways through their interaction with specific, naturally occurring oxysterols, including 22(R)-hydroxycholesterol, 24(S)-hydroxycholesterol, and 24(S),25-epoxycholesterol. Using a ligand binding assay that incorporates scintillation proximity technology to circumvent many of the problems associated with assaying extremely hydrophobic ligands, we now demonstrate that these oxysterols bind directly to LXRs at concentrations that occur in vivo. To characterize further the structural determinants required for potent LXR ligands, we synthesized and tested a series of related compounds for binding to LXRs and activation of transcription. These studies revealed that position-specific monooxidation of the sterol side chain is requisite for LXR high-affinity binding and activation. Enhanced binding and activation can also be achieved through the use of 24-oxo ligands that act as hydrogen bond acceptors in the side chain. In addition, introduction of an oxygen on the sterol B-ring results in a ligand with LXRalpha-subtype selectivity. These results support the hypothesis that naturally occurring oxysterols are physiological ligands for LXRs and show that a rational, structure-based approach can be used to design potent LXR ligands for pharmacologic use.