With the aim of identifying novel regulators of adipocyte differentiation, we have cloned and characterized preadipocyte factor 1 (pref-1), a novel member of the epidermal growth factor (EGF)-like family of proteins. Pref-1 is synthesized as a transmembrane protein with six tandem EGF-like repeats. In preadipocytes, multiple discrete forms of pref-1 protein of 45-60 kd are present, owing in part to N-linked glycosylation. While pref-1 mRNA is abundant in preadipocytes, its expression is completely abolished during differentiation of 3T3-L1 preadipocytes to adipocytes. Moreover, constitutive expression of pref-1 in preadipocytes, which in effect blocks its down-regulation, drastically inhibits adipose differentiation. This indicates that pref-1 functions as a negative regulator of adipocyte differentiation, possibly in a manner analogous to EGF-like proteins that govern cell fate decisions in invertebrates.