The differentiation of 3T3-L1 preadipocytes is regulated in part by a cascade of transcriptional events involving activation of the CCAAT/enhancer-binding proteins (C/EBPs) and peroxisome proliferator-activated receptor gamma (PPARgamma) by dexamethasone (DEX), 3-isobutyl-1-methylxanthine (MIX), and insulin. In this study, we demonstrate that exposure of 3T3-L1 preadipocytes to DEX and insulin fails to induce adipogenesis as indicated by a lack of C/EBPalpha, PPARgamma2, and adipose protein 2/fatty acid-binding protein expression; however, PPARgamma1 is expressed. Treatment of these MIX-deficient cells with a PPARgamma ligand, troglitazone, induces C/EBPalpha expression and rescues the block in adipogenesis. In this regard, we also show that induction of C/EBPalpha gene expression by troglitazone in C3H10T1/2 cells ectopically expressing PPARgamma occurs in the absence of ongoing protein synthesis, suggesting a direct transactivation of the C/EBPalpha gene by PPARgamma. Furthermore, ectopic expression of a dominant negative isoform of C/EBPbeta (liver-enriched transcriptional inhibitory protein (LIP)) inhibits the induction of C/EBPalpha, PPARgamma2, and adipose protein 2/fatty acid-binding protein by DEX, MIX, and insulin in 3T3-L1 cells without affecting the induction of PPARgamma1 by DEX. Exposure of LIP-expressing preadipocytes to troglitazone along with DEX, MIX, and insulin induces differentiation into adipocytes. Additionally, we show that sustained expression of C/EBPalpha in these LIP-expressing adipocytes requires constant exposure to troglitazone. Taken together, these observations suggest that inhibition of C/EBPbeta activity not only blocks C/EBPalpha and PPARgamma2 expression, but it also renders the preadipocytes dependent on an exogenous PPARgamma ligand for their differentiation into adipocytes. We propose, therefore, an additional role for C/EBPbeta in regulating PPARgamma activity during adipogenesis, and we suggest an alternative means of inducing preadipocyte differentiation that relies on the dexamethasone-associated induction of PPARgamma1 expression.