Uncoupling protein (UCP) is expressed only in brown adipocytes and is responsible for the unique thermogenic properties of this cell type. The novel brown preadipocyte cell line, HIB-1B, expresses UCP in a strictly differentiation-dependent manner. Transgenic mice studies have shown that a region from kb− 2.8 to− 1.0 of the murine UCP gene is required for brown adipocyte-specific expression. Subsequent analysis identified a potent 220-bp enhancer from kb− 2.5 to− 2.3. We show that this enhancer is active only in differentiated HIB-1B adipocytes, and we identify a peroxisome proliferator-activated receptor γ (PPARγ) response element, referred to as UCP regulatory element 1 (URE1), within the enhancer. URE1 has differentiation-dependent enhancing activity in HIB-1B cells and is required for enhancer action, since mutations of URE1 that block protein binding abolish enhancer activity. We also show that PPARγ antibodies block binding to URE1 of nuclear extracts from cultured brown adipocytes and from the brown adipose tissue of cold-exposed mice. Protein binding to URE1 increases substantially during differentiation of HIB-1B preadipocytes, and PPARγ mRNA levels increase correspondingly. Although forced expression of PPARγ and retinoid X receptor α activates the enhancer in HIB-1B preadipocytes, these receptors are not capable of activating the enhancer in NIH 3T3 fibroblasts. Our results show that PPARγ is a regulator of the differentiation-dependent expression of UCP and suggest that there are additional factors in HIB-1B cells required for brown adipocyte-specific UCP expression.