Terpenoids are diverse groups of metabolite families that are crucial for plant development and required in cosmetics and pharmacological industries. Various development processes and environmental factors, including light, have been shown to affect terpenoid biosynthesis. However, regulatory factors involved in such regulation have not been explored much. Squalene synthases (SQSs), key enzymes in the terpenoid pathway, are pivotal for sterol and triterpene biosynthesis across various organisms. Here, we report that AtSQS1 expression and squalene content are higher in the dark, and light through ELONGATED HYPOCOTYL 5 (HY5) negatively regulates the AtSQS1 and squalene biosynthesis in Arabidopsis thaliana. Our study shows that the AtSQS1 is unaffected in the hy5-215 mutant during light and dark conditions, but is down-regulated in WT and HY5OX lines. The histochemical GUS assays and GFP expression patterns indicate a negative regulation of squalene biosynthesis by AtHY5. Yeast one-hybrid assays, EMSA, and ChIP experiments have confirmed the physical binding of AtHY5 to the AtSQS1 promoter. We have validated results by developing AtSQS1 promoter:reporter lines in WT, hy5-215, and HY5OX backgrounds. The metabolites quantification of squalene and phytosterols further confirms that AtHY5 negatively regulates the squalene biosynthesis in a light-dependent manner in Arabidopsis.