The worldwide epidemic of obesity has increased the urgency to develop a deeper understanding of physiological systems related to energy balance and energy storage, including the mechanisms controlling the development of fat cells (adipocytes). The differentiation of committed preadipocytes to adipocytes is controlled by PPARgamma and several other transcription factors, but the molecular basis for preadipocyte determination is not understood. Using a new method for the quantitative analysis of transcriptional components, we identified the zinc-finger protein Zfp423 as a factor enriched in preadipose versus non-preadipose fibroblasts. Ectopic expression of Zfp423 in non-adipogenic NIH 3T3 fibroblasts robustly activates expression of Pparg in undifferentiated cells and permits cells to undergo adipocyte differentiation under permissive conditions. Short hairpin RNA (shRNA)-mediated reduction of Zfp423 expression in 3T3-L1 cells blunts preadipocyte Pparg expression and diminishes the ability of these cells to differentiate. Furthermore, both brown and white adipocyte differentiation is markedly impaired in Zfp423-deficient mouse embryos. Zfp423 regulates Pparg expression, in part, through amplification of the BMP signalling pathway, an effect dependent on the SMAD-binding capacity of Zfp423. This study identifies Zfp423 as a transcriptional regulator of preadipocyte determination.