Prior loss-of-function analyses revealed that ATPase class I type 8B member 1 [familial intrahepatic cholestasis 1 (FIC1)] posttranslationally activated the farnesoid X receptor (FXR). Mechanisms underlying this regulation were examined by gain-of-function studies in UPS cells, which lack endogenous FIC1 expression. FXR function was assayed in response to wild-type and mutated FIC1 expression constructs with a human bile salt export pump (BSEP) promoter and a variety of cellular localization techniques. FIC1 overexpression led to enhanced phosphorylation and nuclear localization of FXR that was associated with FXR-dependent activation of the BSEP promoter. The FIC1 effect was lost after mutation of the FXR response element in the BSEP promoter. Despite similar levels of FIC1 protein expression, Byler disease FIC1 mutants did not activate BSEP, whereas benign recurrent intrahepatic cholestasis mutants partially activated BSEP. The FIC1 effect was dependent on the presence of the FXR ligand, chenodeoxycholic acid. The effect of FIC1 on FXR phosphorylation and nuclear localization and its effects on BSEP promoter activity could be blocked with protein kinase C zeta (PKC ζ) inhibitors (pseudosubstrate or small interfering RNA silencing). Recombinant PKC ζ directly phosphorylated immunoprecipitated FXR. The mutation of threonine 442 of FXR to alanine yielded a dominant negative protein, whereas the phosphomimetic conversion to glutamate resulted in FXR with enhanced activity and nuclear localization. Inhibition of PKC ζ in Caco-2 cells resulted in activation of the human apical sodium-dependent bile acid transporter promoter. Conclusion: These results demonstrate that FIC1 signals to FXR via PKC ζ. FIC1-related liver disease is likely related to downstream effects of FXR on bile acid homeostasis. Benign recurrent intrahepatic cholestasis emanates from a partially functional FIC1 protein. Phosphorylation of FXR is an important mechanism for regulating its activity. (HEPATOLOGY 2008;48:1896-1905.)