We have studied the expression of the Id1, Id2, and Id3 genes during adipose differentiation of 3T3-F442A cells. All three Id mRNAs are present in preadipose cells, but the mRNA for Id3 is the most abundant. All three Id mRNAs sharply decline in the course of adipose differentiation, and their virtual disappearance precedes differentiation. The decrease in Id2 and Id3 is associated with adipose differentiation rather than with growth arrest since it is not observed in 3T3-C2 cells, a fibroblast line with a very low susceptibility to adipose conversion. The decline in Id2 and Id3 mRNAs is associated with a reduced transcription rate of the two genes. Id1 mRNA is reduced in amount during adipose conversion of 3T3-F442A cells, but the decrease is also observed in resting 3T3-C2 cells and is associated with very little decrease in transcription of the gene. Addition of fresh serum reactivates Id3 gene expression in quiescent 3T3-C2 cells but not in adipose 3T3-F442A cells. Stably transformed preadipose cells expressing an Id3 cDNA under the control of a viral promoter are virtually unable to differentiate. We postulate that the Id3 protein is a negative regulator of fat cell formation and presumably acts by preventing an as yet unidentified basic helix-loop-helix protein from activating the program of differentiation.