Sterol regulatory element-binding protein-1c (SREBP-1c) enhances transcription of genes encoding enzymes of unsaturated fatty acid biosynthesis in liver. SREBP-1c mRNA is known to increase when cells are treated with agonists of liver X receptor (LXR), a nuclear hormone receptor, and to decrease when cells are treated with unsaturated fatty acids, the end products of SREBP-1c action. Here we show that unsaturated fatty acids lower SREBP-1c mRNA levels in part by antagonizing the actions of LXR. In cultured rat hepatoma cells, arachidonic acid and other fatty acids competitively inhibited activation of the endogenous SREBP-1c gene by an LXR ligand. Arachidonate also blocked the activation of a synthetic LXR-dependent promoter in transfected human embryonic kidney-293 cells. In vitro, arachidonate and other unsaturated fatty acids competitively blocked activation of LXR, as reflected by a fluorescence polarization assay that measures ligand-dependent binding of LXR to a peptide derived from a coactivator. These data offer a potential mechanism that partially explains the long-known ability of dietary unsaturated fatty acids to decrease the synthesis and secretion of fatty acids and triglycerides in livers of humans and other animals.