The stability of the endoplasmic reticulum (ER) glycoprotein 3-hydroxy-3-methylglutaryl coenzyme A reductase (HMGR), the key enzyme in cholesterol biosynthesis, is negatively regulated by sterols. HMGR is anchored in the ER via its N-terminal region, which spans the membrane eight times and contains a sterolsensing domain. We have previously established that degradation of mammalian HMGR is mediated by the ubiquitin-proteasome system (Ravid, T., Doolman, R., Avner, R., Harats, D., and Roitelman, J. (2000) J. Biol. Chem. 275, 35840-35847). Here we expressed in HEK-293 cells an HA-tagged-truncated version of HMGR that encompasses all eight transmembrane spans (350 N-terminal residues). Similar to endogenous HMGR, degradation of this HMG350-3HA protein was accelerated by sterols, validating it as a model to study HMGR turnover. The degradation of HMG240-3HA, which lacks the last two transmembrane spans yet retains an intact sterol-sensing domain, was no longer accelerated by sterols. Using HMG350-3HA, we demonstrate that transmembrane region of HMGR is ubiquitinated in a sterol-regulated fashion. Through site-directed Lys → Arg mutagenesis, we pinpoint Lys248 and Lys89 as the internal lysines for ubiquitin attachment, with Lys248 serving as the major acceptor site for polyubiquitination. Moreover, the data indicate that the N terminus is also ubiquitinated. The degradation rates of the Lys → Arg mutants correlates with their level of ubiquitination. Notably, lysine-less HMG350-3HA is degraded faster than wild-type protein, suggesting that lysines other than Lys89 and Lys248 attenuate ubiquitination at the latter residues. The ATP-dependent ubiquitination of HMGR in isolated microsomes requires E1 as the sole cytosolic protein, indicating that ER-bound E2 and E3 enzymes catalyze this modification. Polyubiquitination of HMGR is correlated with its extraction from the ER membrane, a process likely to be assisted by cytosolic p97/VCP/Cdc48p-Ufd1-Np14 complex, as only ubiquitinated HMGR pulls down p97.