The yellow obese syndrome in mice encompasses many pleiotropic effects including yellow fur, maturity-onset obesity, hyperinsulinemia, insulin resistance, hyperglycemia, increased skeletal length and lean body mass, and increased susceptibility to neoplasia. The molecular basis of this syndrome is beginning to be unraveled and may have implications for human obesity and diabetes. Normally, the agouti gene is expressed during the hair-growth cycle in the neonatal skin where it functions as a paracrine regulator of pigmentation. The secreted agouti protein antagonizes the binding of the alpha-melanocyte-stimulating hormone to its receptor (melanocortin 1 receptor) on the surface of hair bulb melanocytes, causing alterations in intracellular cAMP levels. Widespread, ectopic expression of the mouse agouti gene is central to the yellow obese phenotype, as demonstrated by the molecular cloning of several dominant agouti mutations and the ubiquitous expression of the wild-type agouti gene in transgenic mice. Recent experiments have revealed that the hypothalamus and adipose tissue are biologically active target sites for agouti in the yellow obese mutant lines.