Oxysterols regulate the expression of genes involved in cholesterol and lipid metabolism and serve as intermediates in cholesterol catabolism. Among the most potent of regulatory oxysterols is 25-hydroxycholesterol, whose biosynthetic enzyme has not yet been isolated. Here, we report the cloning of cholesterol 25-hydroxylase cDNAs from the mouse and human. The encoded enzymes are polytopic membrane proteins of 298 and 272 amino acids, respectively, which contain clusters of histidine residues that are essential for catalytic activity. Unlike most other sterol hydroxylases, cholesterol 25-hydroxylase is not a cytochrome P450, but rather it is a member of a small family of enzymes that utilize diiron cofactors to catalyze the hydroxylation of hydrophobic substrates. The cholesterol 25-hydroxylase gene lacks introns, and in the human it is located on chromosome 10q23. The murine gene is expressed at low levels in multiple tissues. Expression of cholesterol 25-hydroxylase in transfected cells reduces the biosynthesis of cholesterol from acetate and suppresses the cleavage of sterol regulatory element binding protein-1 and -2. The data suggest that cholesterol 25-hydroxylase has the capacity to play an important role in regulating lipid metabolism by synthesizing a co-repressor that blocks sterol regulatory element binding protein processing and ultimately leads to inhibition of gene transcription.