Thiazolidinediones (TZDs) are insulin-sensitizing drugs and are potent agonists of the nuclear peroxisome proliferator-activated receptor-γ (PPAR-γ). Although muscle is the major organ responsible for insulin-stimulated glucose disposal, PPAR-γ is more highly expressed in adipose tissue than in muscle. To address this issue, we used the Cre-loxP system to knock out Pparg, the gene encoding PPAR-γ, in mouse skeletal muscle. As early as 4 months of age, mice with targeted disruption of PPAR-γ in muscle showed glucose intolerance and progressive insulin resistance. Using the hyperinsulinemic-euglycemic clamp technique, the in vivo insulin-stimulated glucose disposal rate (IS-GDR) was reduced by ∼80% and was unchanged by 3 weeks of TZD treatment. These effects reveal a crucial role for muscle PPAR-γ in the maintenance of skeletal muscle insulin action, the etiology of insulin resistance and the action of TZDs.