Peroxisome proliferator-activated receptor gamma (PPARγ) is a nuclear receptor involved in the control of metabolism. Research on PPARγ is oriented towards understanding its role in insulin sensitization, which was inspired by the discovery that antidiabetic agents, the thiazolidinediones, were agonists for PPARγ. PPARγ stimulation improves glucose tolerance and insulin sensitivity in type 2 diabetic patients and in animal models of insulin resistance through mechanisms that are incompletely understood. Upon activation, PPARγ heterodimerizes with retinoid X receptor, recruits specific cofactors, and binds to responsive DNA elements, thereby stimulating the transcription of target genes. Because PPARγ is highly enriched in adipose tissue and because of its major role in adipocyte differentiation, it is thought that the effects of PPARγ in adipose tissue are crucial to explain its role in insulin sensitization, but recent studies have highlighted the contribution of other tissues as well. Although relatively potent for their insulin-sensitizing action, currently marketed PPARγ activators have some important undesirable side effects. These concerns led to the discovery of new ligands with potent antidiabetic properties but devoid of certain of these side effects. Data from human genetic studies and from PPARγ heterozygous knockout mice indicate that a reduction in PPARγ activity could paradoxically improve insulin sensitivity. These findings suggest that modulation of PPARγ activity by partial agonists or compounds that affect cofactor recruitment might hold promise for the treatment of insulin resistance.