Adipocyte differentiation is an important component of obesity and other metabolic diseases. This process is strongly inhibited by many mitogens and oncogenes. Several growth factors that inhibit fat cell differentiation caused mitogen-activated protein (MAP) kinase-mediated phosphorylation of the dominant adipogenic transcription factor peroxisome proliferator-activated receptor gamma (PPAR gamma) and reduction of its transcriptional activity. Expression of PPAR gamma with a nonphosphorylatable mutation at this site (serine-112) yielded cells with increased sensitivity to ligand-induced adipogenesis and resistance to inhibition of differentiation by mitogens. These results indicate that covalent modification of PPAR gamma by serum and growth factors is a major regulator of the balance between cell growth and differentiation in the adipose cell lineage.