Cellular differentiation involves transcriptional responses to environmental stimuli. Adipocyte differentiation is inhibited under hypoxic conditions, indicating that oxygen (O₂) is an important physiological regulator of adipogenesis. Hypoxia inhibits PPARγ2 nuclear hormone receptor transcription, and overexpression of PPARγ2 or C/EBPβ stimulates adipogenesis under hypoxia. Mouse embryonic fibroblasts deficient in hypoxia-inducible transcription factor 1α (HIF-1α) are refractory to hypoxia-mediated inhibition of adipogenesis. The HIF-1-regulated gene DEC1/Stra13, a member of the Drosophila hairy/Enhancer of split transcription repressor family, represses PPARγ2 promoter activation and functions as an effector of hypoxia-mediated inhibition of adipogenesis. These data indicate that an O₂-sensitive signaling mechanism regulates adipogenesis. Thus, agents that regulate HIF-1 activity or O₂ sensing may be used to inhibit adipogenesis and control obesity.