p27(Kip1), an important regulator of Cdk2 activity and G₁/S transition, is tightly regulated in a cell‐type and condition‐specific manner to integrate mitogenic and differentiation signals governing cell cycle progression. We show that p27 protein levels progressively declined from mid‐G₁ through late‐G₂ phase as density‐arrested 3T3‐L1 preadipocytes synchronously reentered the cell cycle during early stages of adipocyte differentiation. This dramatic fall in p27 protein accumulation was due, at least in part, to a decrease in protein stability. Specific inhibitors of the 26S proteasome were shown to completely block the decrease in p27 protein levels throughout G₁, increase the abundance of ubiquitylated p27 protein, and inhibit G₁/S transition resulting in G₁ arrest. It is further demonstrated that p27 was phosphorylated on threonine 187 during S phase progression by Cdk2 and that phosphorylated p27 was polyubiquitylated and degraded. Furthermore, we demonstrate that Skp2 and Cks1 dramatically increased during S/G₂ phase progression concomitantly with the maximal fall in p27 protein. Complete knockdown of Skp2 with RNA interference partially prevented p27 degradation equivalent to that observed with Cdk2 blockade suggesting that the SCF^Skp2 E3 ligase and other proteasome‐dependent mechanisms contribute to p27 degradation during preadipocyte replication. Interestingly, Skp2‐mediated p27 degradation was not essential for G₁/S or S/G₂ transition as preadipocytes shifted from quiescence to proliferation during adipocyte hyperplasia. Finally, evidence is presented suggesting that elevated p27 protein in the absence of Skp2 was neutralized by sequestration of p27 protein into Cyclin D1/Cdk4 complexes. J. Cell. Physiol. 211: 101–111, 2007. © 2006 Wiley‐Liss, Inc.