Retrograde trafficking from the Golgi complex to endoplasmic reticulum (ER) through COPI-coated vesicles has been implicated in lipid homeostasis. Here, we find that a block in COPI-dependent retrograde trafficking promotes processing and nuclear translocation of sterol regulatory element binding proteins (SREBPs), and upregulates the expression of downstream genes that are involved in lipid biosynthesis. This elevation in SREBP processing and activation is not caused by mislocalization of S1P or S2P (also known as MBTPS1 and MBTPS2, respectively), two Golgi-resident endoproteases that are involved in SREBP processing, but instead by increased Golgi residence of SREBPs, leading to their increased susceptibility to processing by the endoproteases. Analyses using a processing-defective SREBP mutant suggest that a fraction of SREBP molecules undergo basal cycling between the ER and Golgi in complex with SREBP cleavage-activating protein (SCAP). Furthermore, we show that SCAP alone is retrieved from the Golgi and moves to the ER after processing of SREBP under steroldeficient conditions. Thus, our observations indicate that COPI-mediated retrograde trafficking is crucial for preventing unnecessary SREBP activation, by retrieving the small amounts of SCAP-SREBP complex that escape from the sterol-regulated ER retention machinery, as well as for the reuse of SCAP.