Cholesterol 7α hydroxlyase (CYP7A1) is a key enzyme in cholesterol catabolism to bile acids and its activity is important for maintaining appropriate cholesterol levels. The murine CYP7A1 gene is highly inducible by thyroid hormone in vivo and there is an inverse relationship between thyroid hormone and serum cholesterol. Eventhough gene expression has been shown to be upregulated, whether the induction was mediated through a direct effect of thyroid hormone on the CYP7A1 promoter has never been established. Using gene targeted mice, we show that either of the two TR isoforms are sufficient to maintain normal hepatic CYP7A1 expression but a loss of both results in a significant decrease in expression. We also identified two new functional thyroid hormone receptor-binding sites in the CYP7A1 5′ flanking sequence located 3 kb upstream from the transcription start site. One site is a DR-0, which is an unusual type of TR response element, and the other consists of only a single recognizable half site that is required for TR/retinoid X receptor (RXR) binding. These two independent TR-binding sites are closely spaced and both are required for full induction of the CYP7A1 promoter by thyroid hormone, although the DR-0 site was more crucial.