Differentiation of 3T3-L1 preadipocytes into adipocytes is induced by a combination of inducers, including a glucocorticoid, an agent that elevates cellular cAMP, and a ligand of the insulin-like growth factor-1 receptor. Previous studies have implicated protein-tyrosine phosphatase (PTPase) HA2, a homologue of PTPase 1B, in the signaling cascade initiated by the differentiation inducers. Vanadate, a potent PTPase inhibitor, blocks adipocyte differentiation at an early stage in the program, but has no effect on the mitotic clonal expansion required for differentiation. Exposure of preadipocytes to vanadate along with the inducing agents led to the accumulation of pp35, a phosphotyrosyl protein that is a substrate for PTPase HA2. pp35 was purified to homogeneity and shown by amino acid sequence and mass analyses of tryptic peptides to be c-Crk, a known cytoplasmic target of the insulin-like growth factor-1 receptor tyrosine kinase. Transfection of 3T3-L1 preadipocytes with a c-Crk antisense RNA expression vector markedly reduced c-Crk levels and prevented differentiation into adipocytes. Studies with C3G, a protein that binds to the SH3 domain in c-Crk, showed that phosphorylation of c-Crk rendered the SH3 domain inaccessible to C3G. Taken together, these findings indicate that locking c-Crk in the phosphorylated state with vanadate prevents its participation in the signaling system that initiates adipocyte differentiation.