The molecular basis for adipocyte-specific gene expression is not known. We have demonstrated that while short (-168) segments of the 5'-flanking sequence of the adipocyte P2 gene containing AP-1- and C/EBP-binding sites can direct expression of a heterologous gene in cultured adipocytes, they cannot support tissue-specific expression in a transgenic mouse. We have therefore analyzed larger segments of the aP2 5'-flanking region by transfection into adipocytes and have found an enhancer at -5.4 kb. This 500-bp enhancer directs expression of the bacterial chloramphenicol acetyltransferase (CAT) gene in a differentiation-dependent fashion when linked to its own minimal promoter or to an enhancerless SV40 promoter. Moreover, this enhancer stimulates very strong and highly specific expression from the CAT gene in the adipose tissues of transgenic mice. A smaller fragment (190 bp) having enhancer activity in adipocytes was defined and demonstrated to contain a binding site for an abundant nuclear protein. This factor has the binding specificity and several other properties characteristic of the nuclear factor 1 (NF-1) transcription/replication factor family, and mutation of this NF-1-binding site greatly reduces the function of the 500-bp enhancer. These results identify and characterize the first functional enhancer with specificity for adipose cells and also demonstrate that a member(s) of the NF-1 family is involved in adipocyte-specific gene expression.