In response to sterol deprivation, two sequential proteolytic cleavages release the NH2-terminal fragments of sterol regulatory element-binding proteins (SREBPs) from cell membranes. The fragments translocate to the nucleus where they activate genes involved in cholesterol and fatty acid metabolism. The SREBPs are bound to membranes in a hairpin fashion. The NH2- terminal and COOH-terminal domains face the cytoplasm, separated by two membrane spanning segments and a short lumenal loop. The first cleavage occurs at Site-1 in the lumenal loop. The NH2-terminal fragment is then released by cleavage at Site-2, which is believed to lie within the first transmembrane segment. Here, we use a novel cysteine panning method to identify the second cleavage site (Site-2) in human SREBP-2 as the Leu484Cys485 bond that lies at the junction between the cytoplasmic NH2-terminal fragment and the first transmembrane segment. We transfected cells with cDNAs encoding fusion proteins with single cysteine residues at positions to the NH2-terminal and COOH-terminal sides of cysteine 485. The NH2-terminal fragments were tested for susceptibility to modification with N(α)-(3-maleimidylpropionyl)biocytin, which attaches a biotin group to cysteine sulfhydryls. Cysteines to the NH2-terminal side of cysteine 485 were retained on the NH2-terminal fragment, but cysteines to the COOH- terminal side of leucine 484 were lost. Leucine 484 is three residues to the COOH-terminal side of the tetrapeptide Asp-Arg-Ser-Arg, which immediately precedes the first transmembrane segment and is required for Site-2 cleavage.