Adipocyte differentiation is regulated by insulin and IGF-I, which transmit signals by activating their receptor tyrosine kinase. SH2-B is an adaptor protein containing pleckstrin homology and Src homology 2 (SH2) domains that have been implicated in insulin and IGF-I receptor signaling. In this study, we found a strong link between SH2-B levels and adipogenesis. The fat mass and expression of adipogenic genes including peroxisome proliferator-activated receptor gamma (PPARgamma) were reduced in white adipose tissue of SH2-B-/- mice. Reduced adipocyte differentiation of SH2-B-deficient mouse embryonic fibroblasts (MEFs) was observed in response to insulin and dexamethasone, whereas retroviral SH2-B overexpression enhanced differentiation of 3T3-L1 preadipocytes to adipocytes. SH2-B overexpression enhanced mRNA level of PPARgamma in 3T3-L1 cells, whereas PPARgamma levels were reduced in SH2-B-deficient MEFs in response to insulin. SH2-B-mediated up-regulation of PPARgamma mRNA was blocked by a phosphatidylinositol 3-kinase inhibitor, but not by a MAPK kinase inhibitor. Insulin-induced Akt activation and the phosphorylation of forkhead transcription factor (FKHR/Foxo1), a negative regulator of PPARgamma transcription, were up-regulated by SH2-B overexpression, but reduced in SH2-B-deficient MEFs. These data indicate that SH2-B is a key regulator of adipogenesis both in vivo and in vitro by regulating the insulin/IGF-I receptor-Akt-Foxo1-PPARgamma pathway.