CCAAT/enhancer-binding protein  (C/EBP) plays a key role in initiation of adipogenesis in adipose tissue and gluconeogenesis in liver; however, the role of C/EBP in hepatic lipogenesis remains undefined. Here we show that C/EBP inactivation in Lepr db/db mice attenuates obesity, fatty liver, and diabetes. In addition to impaired adipogenesis, livers from C/EBP ؊/؊ x Lepr db/db mice had dramatically decreased triglyceride content and reduced lipogenic enzyme activity. C/EBP deletion in Lepr db/db mice down-regulated peroxisome proliferator-activated receptor ␥2 (PPAR␥2) and stearoyl-CoA desaturase-1 and up-regulated PPAR␣ independent of SREBP1c. Conversely, C/EBP overexpression in wild-type mice increased PPAR␥2 and stearoyl-CoA desaturase-1 mRNA and hepatic triglyceride content. In FAO cells, overexpression of the liver inhibiting form of C/EBP or C/EBP RNA interference attenuated palmitate-induced triglyceride accumulation and reduced PPAR␥2 and triglyceride levels in the liver in vivo. Leptin and the anti-diabetic drug metformin acutely down-regulated C/EBP expression in hepatocytes, whereas fatty acids up-regulate C/EBP expression. These data provide novel evidence linking C/EBP expression to lipogenesis and energy balance with important implications for the treatment of obesity and fatty liver disease.Obesity is the most common nutritional disorder in Western societies. Today in the United States, more than 60% of people are either overweight (body mass index (BMI) Ͼ 25) or obese (BMI Ͼ 30) (1). Obesity is frequently associated with type II diabetes, hypertension, and hyperlipidemia, all known risk factors for cardiovascular disease (2). Obesity is also a major risk factor for non-alcoholic fatty liver disease, one of the most common emerging liver diseases in Western countries coinciding with the worldwide obesity epidemic (3, 4). The underlying transcriptional events that contribute to obesity and its associated disorders are not well understood. Some of the genes that regulate body weight have been identified as well as additional neuropeptides, hormones, and nutritional factors that play a role in body weight regulation, particularly through the -adrenergic system (5, 6). Discovery of the hormone leptin and its receptors, which suppress appetite and reduce fat mass, has dramatically increased our understanding of the regulation of energy balance (7,8). More recently, the study of specific transcription factor genes and their metabolism has provided powerful new tools for understanding the integrated mechanisms underlying obesity and diabetes (9 -11). This is most elegantly illustrated using tissue-specific gene knockouts and overexpression models to elucidate the mechanism of action of the PPAR 5 family of nuclear hormone receptors (12). The CCAAT/enhancer-binding protein (C/EBP) family includes five nuclear transcription factors, C/EBP ␣, , ␥, ␦, and ⑀, encoded by separate genes located on different chromosomes (13,14). Collectively, C/EBPs are expressed across a variety of cell types, and...