Obesity is a risk factor for breast cancer, and low blood concentrations of adiponectin are associated with high incidence and poor prognosis of breast cancer. However, the molecular mechanisms underlying such inhibitory effects of adiponectin remain to be defined. By using MCF7 cells, we investigated the mechanisms underlying the inhibitory effects of adiponectin on breast cancer cells, particularly in the context of opposing IGF-1-induced proliferation. We found that adiponectin, at 20 and 40 μg/ml, reduced MCF7 cell growth in the absence and presence of IGF-1. These inhibitory effects were primarily the result of the significant increase of cells at G(1)/G(0) phase and concomitant decrease of cells at S phase. In addition, the percentage of apoptotic cells increased more than two-fold. Within 30-min of adiponectin addition, the phosphorylation of AMPKα was sharply elevated, and the level of IGF-1-activated Akt was decreased. Prolonged exposure to adiponectin resulted in reduction of cyclin D1 and cyclin E2 expression. Adiponectin also increased intracellular levels of cAMP and the activity of protein kinase-A (PKA). The inhibitors of PKA completely abolished the adiponectin's effects on cell growth. In conclusion, our studies revealed an important cellular mechanism underlying the relationship between reduced adiponectin concentrations and breast cancer development.