The farnesoid X receptor (FXR) is a nuclear receptor expressed in tissues exposed to high concentrations of bile acids such as the liver, kidney and intestine and functions as a bile acid sensor. FXR regulates the expression of various transport proteins and biosynthetic enzymes crucial to the physiological maintenance of lipids, cholesterol and bile acid homeostasis. The concept of reverse endocrinology, whereby the receptor is identified first, followed by the identification of ligands and the sequential elucidation of the physiological role of the receptor has been widely used for a number of orphan nuclear receptors. The design of synthetic high affinity ligands acting via these receptors not only helps to decipher the function of the receptor, but also should lead to the development of novel and highly specific drugs. The bile acid receptor FXR is a perfect example where this strategy helped with understanding the role of this receptor in cholesterol and bile acid homeostasis. Regulation of FXR through small-molecule drugs represents a promising therapy for diseases resulting from lipid, cholesterol and bile acid abnormalities.