CCAAT/enhancer binding protein alpha (C/EBPalpha) is a transcription factor that has been implicated in the regulation of cell-specific gene expression mainly in hepatocytes and adipocytes but also in several other terminally differentiated cells. It has been previously demonstrated that the C/EBPalpha protein is functionally indispensable, as inactivation of the C/EBPalpha gene by homologous recombination in mice results in the death of animals homozygous for the mutation shortly after birth (Wang, N., Finegold, M. J., Bradley, A., Ou, C. N., Abdelsayed, S. V., Wilde, M. D., Taylor, L. R., Wilson, D. R., and Darlington, G. J. (1995) Science 269, 1108-1112). Here we show that C/EBPalpha -1-mice have defects in the control of hepatic growth and lung development. The liver architecture is disturbed, with acinar formation, in a pattern suggestive of either regenerating liver or pseudoglandular hepatocellular carcinoma. Pulmonary histology shows hyperproliferation of type II pneumocytes and disturbed alveolar architecture. At the molecular level, accumulation of glycogen and lipids in the liver and adipose tissues is impaired, and the mutant animals are severely hypoglycemic. Levels of c-myc and c-jun RNA are specifically induced by several fold in the livers of the C/EBPalpha -/- animals, indicating an active proliferative stage. Furthermore, immunohistologic detection with an antibody to proliferating cell nuclear antigen/cyclin shows a 5-10 times higher frequency of positively stained hepatocytes in C/EBPalpha -/- liver. These results suggest a critical role for C/EBPalpha in vivo for the acquisition of terminally differentiated functions in liver including the maintenance of physiologic energy homeostasis.