Biotin is a water-soluble vitamin that functions as a prosthetic group in carboxylation reactions. In addition to its role as a cofactor, biotin has multiple roles in gene regulation. We analyzed biotin effects on gene expression in the yeast Saccharomyces cerevisiae and demonstrated by microarray, Northern, and Western analyses that all yeast genes encoding proteins involved in biotin metabolism are up-regulated following biotin depletion. Many of these genes contain a palindromic promoter element that is necessary and sufficient for mediating the biotin response and functions as an upstream-activating sequence. Mutants lacking the plasma membrane biotin transporter Vht1p display constitutively high expression levels of biotin-responsive genes. However, they react normally to biotin precursors that do not require Vht1p for uptake. The biotin-like effect of precursors with regard to gene expression requires their intracellular conversion to biotin. This demonstrates that Vht1p does not act as a sensor for biotin and that intracellular biotin is crucial for gene expression. Mutants with defects in biotin-protein ligase, similar to vht1delta mutants, also display aberrantly high expression of biotin-responsive genes. Like vht1delta cells, they have reduced levels of protein biotinylation, but unlike vht1delta mutants, they possess normal levels of free intracellular biotin. This indicates that free intracellular biotin is irrelevant for gene regulation and identifies biotin-protein ligase as an important element of the biotin-sensing pathway in yeast.