We examined the capacity of PTHrP to modulate the terminal differentiation of the preadipocytic cell line, 3T3-L1. These cells express endogenous PTHrP and its receptor, but expression levels were undetectable after differentiation into mature adipocytes. Cells stably overexpressing PTHrP failed to differentiate when induced to undergo adipogenesis and proliferated at a faster rate. MAPK activity was elevated in PTHrP-transfected 3T3-L1 cells, and treatment with the PKA inhibitor H-8 decreased this activity. Inhibition of MAPK kinase with PD098059 permitted terminal differentiation of PTHrP-transfected 3T3-L1 cells to proceed. Although PPAR gamma gene expression levels remained relatively constant in the PTHrP-transfected cells, PPAR gamma phosphorylation was enhanced. Furthermore, the capacity of PPAR gamma to stimulate transcription in the presence of troglitazone was diminished by PTHrP. Expression of the PPAR gamma-regulated adipocyte specific gene aP2 transiently rose and then fell in PTHrP-transfected cells. These results indicate that PTHrP can increase MAPK activity in 3T3-L1 cells via the PKA pathway, thereby enhancing PPAR gamma phosphorylation. This modification can inactivate the transcriptional enhancing activity of PPAR gamma and diminish the expression of adipocyte-specific genes. These studies therefore demonstrate that PTHrP may inhibit the terminal differentiation of preadipocytes and describe a molecular pathway by which this action can be achieved.