The farnesoid X receptor (FXR; NR1H4) regulates bile acid and lipid homeostasis by acting as an intracellular bile acid-sensing transcription factor. Several identified FXR target genes serve critical roles in the synthesis and transport of bile acids as well as in lipid metabolism. Here we used Affymetrix micro-array and Northern analysis to demonstrate that two enzymes involved in conjugation of bile acids to taurine and glycine, namely bile acid-CoA synthetase (BACS) and bile acid-CoA: amino acid N-acetyltransferase (BAT) are induced by FXR in rat liver. Analysis of the human BACS and BAT genes revealed the presence of functional response elements in the proximal promoter of BACS and in the intronic region between exons 1 and 2 of the BAT gene. The response elements resemble the consensus FXR binding site consisting of two nuclear receptor half-sites organized as an inverted repeat and separated by a single nucleotide (IR-1). These response elements directly bind FXR/retinoid X receptor (RXR) heterodimers and confer the activity of FXR ligands in transient transfection experiments. Further mutational analysis confirms that the IR-1 sequence of the BACS and BAT genes mediate transactivation by FXR/RXR heterodimers. Finally, Fisher rats treated with the synthetic FXR ligand GW4064 clearly show increased transcript levels of both the BACS and BAT mRNA. These studies demonstrate a mechanism by which FXR regulates bile acid amidation, a critical component of the enterohepatic circulation of bile acids.