Obese patients have chronic, low-grade inflammation that predisposes to type 2 diabetes and results, in part, from dysregulated visceral white adipose tissue (WAT) functions. The specific signaling pathways underlying WAT dysregulation, however, remain unclear. Here we report that the PPARγ signaling pathway operates differently in the visceral WAT of lean and obese mice. PPARγ in visceral, but not subcutaneous, WAT from obese mice displayed increased sensitivity to activation by its agonist rosiglitazone. This increased sensitivity correlated with increased expression of the gene encoding the ubiquitin hydrolase/ligase ubiquitin carboxyterminal esterase L1 (UCH-L1) and with increased degradation of the PPARγ heterodimerization partner retinoid X receptor α (RXRα), but not RXRβ, in visceral WAT from obese humans and mice. Interestingly, increased UCH-L1 expression and RXRα proteasomal degradation was induced in vitro by conditions mimicking hypoxia, a condition that occurs in obese visceral WAT. Finally, PPARγ-RXRβ heterodimers, but not PPARγ-RXRα complexes, were able to efficiently dismiss the transcriptional corepressor silencing mediator for retinoid and thyroid hormone receptors (SMRT) upon agonist binding. Increasing the RXRα/RXRβ ratio resulted in increased PPARγ responsiveness following agonist stimulation. Thus, the selective proteasomal degradation of RXRα initiated by UCH-L1 upregulation modulates the relative affinity of PPARγ heterodimers for SMRT and their responsiveness to PPARγ agonists, ultimately activating the PPARγ-controlled gene network in visceral WAT of obese animals and humans.