Cholesterol 7-alpha-hydroxylase (CYP7A1) catalyzes a rate-limiting step in bile acid synthesis in liver, and its gene transcription is under complex regulation by multiple nuclear receptors in response to bile acids, cholesterol derivatives, and hormones. The liver receptor homolog-1 (LRH-1), a member of the fushi tarazu factor 1 subfamily of nuclear receptors, has emerged as an essential regulator for the expression of cyp7a1. In this report, we demonstrate Prox1, a prospero-related homeobox transcription factor, identified through a yeast two-hybrid screening, can directly interact with human LRH-1 (hLRH-1) and suppresses hLRH-1-mediated transcriptional activation of human cyp7a1 gene. Biochemical analysis demonstrates that Prox1 interacts with both the ligand binding domain (LBD) and the DNA binding domain (DBD) of hLRH-1. An LRKLL motif in Prox1 is important for the interaction with the LBD but not the DBD of hLRH-1. In hLRH-1 LBD, helices 2 and 10 are essential for Prox1 recruitment. The suppression by Prox1 on the transcriptional activity of hLRH-1 can be mediated through its interaction with the LBD or the DBD of hLRH-1. Gel shift assays reveal that Prox1 impairs the binding of hLRH-1 to the promoter of human cyp7a1 gene.