Cryptococcus neoformans is an environmental pathogen requiring atmospheric levels of oxygen for optimal growth. Upon inhalation, C. neoformans disseminates to the brain and causes meningoencephalitis, but the mechanisms by which the pathogen adapts to the low-oxygen environment in the brain have not been investigated. We found that SRE1, a homologue of the mammalian sterol regulatory element-binding protein (SREBP), functions in an oxygen-sensing pathway. Low oxygen decreased sterol synthesis in C. neoformans and triggered activation of membrane-bound Sre1p by the cleavage-activating protein, Scp1p. Microarray and Northern blot analysis demonstrated that under low oxygen, Sre1p activates genes required for ergosterol biosynthesis and iron uptake. Consistent with these regulatory functions, sre1Delta cells were hypersensitive to azole drugs and failed to grow under iron-limiting conditions. Importantly, sre1Delta cells failed to produce fulminating brain infection in mice. Our in vitro data support a model in which Sre1p is activated under low oxygen leading to the upregulation of genes required for sterol biosynthesis and growth in a nutrient-limiting environment. Animal studies confirm the importance of SRE1 for C. neoformans to adapt to the host environment and to cause fatal meningoencephalitis, thereby identifying the SREBP pathway as a therapeutic target for cryptococcosis.