Pref-1 is a highly glycosylated Delta-like transmembrane protein containing six epidermal growth factor-like repeats in the extracellular domain. Pref-1 is abundantly expressed in preadipocytes, but expression is down-regulated during adipocyte differentiation. Forced expression of Pref-1 in 3T3-L1 cells was reported to inhibit adipocyte differentiation. Here we show that efficient and regulated processing of Pref-1 occurs in 3T3-L1 preadipocytes releasing most of the extracellular domain as a 50-kDa heterogeneous protein, previously isolated and characterized as FA1. Unexpectedly, we found that forced expression of the soluble form, FA1, or full-length Pref-1 did not inhibit adipocyte differentiation of 3T3-L1 cells when differentiation was induced by standard treatment with methylisobutylxanthine, dexamethasone, and high concentrations of insulin. However, forced expression of either form of Pref-1/FA1 in 3T3-L1 or 3T3-F442A cells inhibited adipocyte differentiation when insulin or insulin-like growth factor-1 (IGF-1) was omitted from the differentiation mixture. We demonstrate that the level of the mature form of the IGF-1 receptor is reduced and that IGF-1-dependent activation of p42/p44 mitogen-activated protein kinases (MAPKs) is compromised in preadipocytes with forced expression of Pref-1. This is accompanied by suppression of clonal expansion and terminal differentiation. Accordingly, supplementation with insulin or IGF-1 rescued p42/p44 MAPK activation, clonal expansion, and adipocyte differentiation in a dose-dependent manner.