Brown adipose cells are specialized to dissipate chemical energy in the form of heat, as a physiological defence against cold and obesity. PRDM16 (PR domain containing 16) is a 140 kDa zinc finger protein that robustly induces brown fat determination and differentiation. Recent data suggests that brown fat cells arise in vivo from a Myf5-positive, myoblastic lineage by the action of PRDM16 (ref. ); however, the molecular mechanisms responsible for this developmental switch is unclear. Here we show that PRDM16 forms a transcriptional complex with the active form of C/EBP-β (also known as LAP), acting as a critical molecular unit that controls the cell fate switch from myoblastic precursors to brown fat cells. Forced expression of PRDM16 and C/EBP-β is sufficient to induce a fully functional brown fat program in naive fibroblastic cells, including skin fibroblasts from mouse and man. Transplantation of fibroblasts expressing these two factors into mice gives rise to an ectopic fat pad with the morphological and biochemical characteristics of brown fat. Like endogenous brown fat, this synthetic brown fat tissue acts as a sink for glucose uptake, as determined by positron emission tomography with fluorodeoxyglucose. These data indicate that the PRDM16–C/EBP-β complex initiates brown fat formation from myoblastic precursors, and may provide opportunities for the development of new therapeutics for obesity and type-2 diabetes.