The retinoblastoma protein (pRB) is an important regulator of development, proliferation, and cellular differentiation. pRB was recently shown to play a pivotal role in adipocyte differentiation, to interact physically with adipogenic CCAAT/enhancer-binding proteins (C/EBPs), and to positively regulate transactivation by C/EBPbeta. We show that PPARgamma-mediated transactivation is pRB-independent, and that ligand-induced transactivation by PPARgamma1 present in RB+/+ and RB-/- mouse embryo fibroblasts is sufficient to bypass the differentiation block imposed by the absence of pRB. The differentiated RB-/- cells accumulate lipid and express adipocyte markers, including C/EBPalpha and PPARgamma2. Interestingly, adipose conversion of pRB-deficient cells occurs in the absence of compensatory up-regulations of the other pRB family members p107 and p130. RB+/+ as well as RB-/- cells efficiently exit from the cell cycle after completion of clonal expansion following stimulation with adipogenic inducers. We conclude that ligand-induced activation of endogenous PPARgamma1 in mouse embryo fibroblasts is sufficient to initiate a transcriptional cascade resulting in induction of PPARgamma2 and C/EBPalpha expression, withdrawal from the cell cycle, and terminal differentiation in the absence of a functional pRB.