Hormonal induction of growth-arrested 3T3-L1 preadipocytes rapidly activates expression of CCAAT/enhancer-binding protein (C/EBP) beta. Acquisition of DNA-binding activity by C/EBPbeta, however, is delayed until the cells synchronously enter the S phase of mitotic clonal expansion (MCE). After MCE, C/EBPbeta activates expression of C/EBPalpha and peroxisome proliferator-activated receptor gamma, which then transcriptionally activate genes that give rise to the adipocyte phenotype. A-C/EBP, which possesses a leucine zipper but lacks functional DNA-binding and transactivation domains, forms stable inactive heterodimers with C/EBPbeta in vitro. Infection of 3T3-L1 preadipocytes with an adenovirus A-C/EBP expression vector interferes with C/EBPbeta function after induction of differentiation. A-C/EBP inhibited events associated with hormone-induced entry of S-phase of the cell cycle, including the turnover of p27/Kip1, a key cyclin-dependent kinase inhibitor, expression of cyclin A and cyclin-dependent kinase 2, DNA replication, MCE, and, subsequently, adipogenesis. Although A-C/EBP blocked cell proliferation associated with MCE, it did not inhibit normal proliferation of 3T3-L1 preadipocytes. Immunofluorescent staining of C/EBPbeta revealed that A-C/EBP prevented the normal punctate nuclear staining of centromeres, an indicator of C/EBPbeta binding to C/EBP regulatory elements in centromeric satellite DNA. The inhibitory effects of A-C/EBP appear to be due primarily to interference with nuclear import of C/EBPbeta caused by obscuring its nuclear localization signal. These findings show that both MCE and adipogenesis are dependent on C/EBPbeta.