Adipocyte differentiation is accompanied by the transcriptional activation of many new genes, including the gene encoding adipocyte P2 (aP2), an intracellular lipid-binding protein. Using specific deletions and point mutations, we have shown that at least two distinct sequence elements in the aP2 promoter contribute to the expression of the chloramphenicol acetyltransferase gene in chimeric constructions transfected into adipose cells. An AP-I site at -120, shown earlier to bind Jun- and Fos-like proteins, serves as a positive regulator of chloramphenicol acetyltransferase gene expression in adipocytes but is specifically silenced by adjacent upstream sequences in preadipocytes. Sequences upstream of the AP-I site at -140 (termed AE-1) can function as an enhancer in both cell types when linked to a viral promoter but can stimulate expression only in fat cells in the intact aP2 promoter. The AE-1 sequence binds an adipocyte protein identical or very closely related to an enhancer-binding protein (C/EBP) that has been previously implicated in the regulation of several liver-specific genes. A functional role for C/EBP in the regulation of the aP2 gene is indicated by the facts that C/EBP mRNA is induced during adipocyte differentiation and the aP2 promoter is transactivated by cotransfection of a C/EBP expression vector into preadipose cells. These results indicate that sequences that bind C/EBP and the Fos-Jun complex play major roles in the expression of the aP2 gene during adipocyte differentiation and demonstrate that C/EBP can directly regulate cellular gene expression.