Th17 cells are a subset of CD4+ T cells with an important role in clearing certain bacterial and fungal pathogens. However, they have also been implicated in autoimmune diseases such as multiple sclerosis. Exposure of naive CD4+ T cells to IL-6 and TGF-β leads to Th17 cell differentiation through a process in which many proteins have been implicated. We report here that ectopic expression of liver X receptor (LXR) inhibits Th17 polarization of mouse CD4+ T cells, while LXR deficiency promotes Th17 differentiation in vitro. LXR activation in mice ameliorated disease in the experimental autoimmune encephalomyelitis (EAE) model of multiple sclerosis, whereas LXR deficiency exacerbated disease. Further analysis revealed that Srebp-1, which is encoded by an LXR target gene, mediated the suppression of Th17 differentiation by binding to the E-box element on the Il17 promoter, physically interacting with aryl hydrocarbon receptor (Ahr) and inhibiting Ahr-controlled Il17 transcription. The putative active site (PAS) domain of Ahr and the N-terminal acidic region of Srebp-1 were essential for this interaction. Additional analyses suggested that similar LXR-dependent mechanisms were operational during human Th17 differentiation in vitro. This study reports what we believe to be a novel signaling pathway underlying LXR-mediated regulation of Th17 cell differentiation and autoimmunity.