CCAAT/enhancer-binding protein β (C/EBPβ) plays a key role in initiation of adipogenesis in adipose tissue and gluconeogenesis in liver; however, the role of C/EBPβ in hepatic lipogenesis remains undefined. Here we show that C/EBPβ inactivation in Leprdb/db mice attenuates obesity, fatty liver, and diabetes. In addition to impaired adipogenesis, livers from C/EBPβ-/- x Leprdb/db mice had dramatically decreased triglyceride content and reduced lipogenic enzyme activity. C/EBPβ deletion in Leprdb/db mice down-regulated peroxisome proliferator-activated receptor γ2 (PPARγ2) and stearoyl-CoA desaturase-1 and up-regulated PPARα independent of SREBP1c. Conversely, C/EBPβ overexpression in wild-type mice increased PPARγ2 and stearoyl-CoA desaturase-1 mRNA and hepatic triglyceride content. In FAO cells, overexpression of the liver inhibiting form of C/EBPβ or C/EBPβ RNA interference attenuated palmitate-induced triglyceride accumulation and reduced PPARγ2 and triglyceride levels in the liver in vivo. Leptin and the anti-diabetic drug metformin acutely down-regulated C/EBPβ expression in hepatocytes, whereas fatty acids up-regulate C/EBPβ expression. These data provide novel evidence linking C/EBPβ expression to lipogenesis and energy balance with important implications for the treatment of obesity and fatty liver disease.