Sterol-dependent regulation of the low density lipoprotein (LDL) receptor promoter has been localized previously to a 16-base pair sequence, designated repeat 2, in the 5'-flanking region of the gene. In the current study, we show that the central 10 nucleotides of repeat 2 are crucial for the sterol regulatory activity. This sequence includes an octamer, designated sterol regulatory element 1 (SRE-1), which was identified previously in the promoter of the gene for 3-hydroxy-3-methylglutaryl coenzyme A synthase, a sterol-regulated enzyme of cholesterol biosynthesis. We made a series of single-base substitutions within a 1471-base pair fragment of the intact LDL receptor promoter, introduced the mutant plasmids into hamster cells by transfection, and measured mRNA levels in the absence and presence of sterols. Substitutions within the 10-base pair sequence in repeat 2 largely prevented the induction of transcription which occurs in the absence of sterols. None of these point mutations affected transcription in the presence of sterols. Like an enhancer, the SRE-1 in repeat 2 functioned in an orientation-independent manner. We interpret these findings to indicate that the SRE-1 of the LDL receptor promoter is a conditional positive element that cooperates with other elements to enhance transcription in the absence of sterols and loses its function in the presence of sterols.