A cell-free assay was developed for the orphan nuclear receptor LXRalpha that measures the ligand-dependent recruitment of a peptide from the steroid receptor coactivator 1 (SRC1) to the nuclear receptor. Using this ligand-sensing assay (LiSA), the structural requirements for activation of the receptor by oxysterols and related compounds were studied. The minimal pharmacophore for receptor activation was shown to be a sterol with a hydrogen bond acceptor at C24. 24(S),25-Epoxycholesterol (1), which meets this criterion, is among the most efficacious of the oxysterols and is an attractive candidate as the LXRalpha natural hormone. Cholenic acid dimethylamide (14) showed increased efficacy compared to 1, whereas the unnatural oxysterol 22(S)-hydroxycholesterol (4) was shown to be an antagonist of 1 in the LiSA. The structural requirements for SRC1 recruitment in the LiSA correlated with the transcriptional activity of compounds in a cell-based reporter assay employing LXRalpha-GAL4 chimeric receptors. Site-directed mutagenesis identified Trp(443) as an amino acid critical for activation of LXRalpha by oxysterol ligands. This information was combined with the structure-activity relationship developed from the LiSA to develop a 3D homology model of LXRalpha. This model may aid the design of synthetic drugs targeted at this transcriptional regulator of cholesterol homeostasis.