The CCAAT-enhancer binding protein (C/EBP) has now been found to promote the terminal differentiation of adipocytes. During the normal course of adipogenesis, C/EBP expression is restricted to a terminal phase wherein proliferative growth is arrested, and specialized cell phenotype is first manifested. A conditional form of C/EBP was developed, making it feasible to test its capacity to regulate the differentiation of cultured adipocytes. Premature expression of C/EBP in adipoblasts caused a direct cessation of mitotic growth. Moreover, when abetted by the effects of three adipogenic hormones, C/EBP promoted terminal cell differentiation. Since C/EBP is expressed in a variety of tissues, it may have a fundamental role in regulating the balance between cell growth and differentiation in higher animals.