The peroxisome proliferator-activated receptor-γ (PPARγ) is a transcription factor that has a pivotal role in adipocyte differentiation and expression of adipocyte-specific genes 1, 3. The PPARγ1 and γ2 isoforms result from alternative splicing 4 and have ligand-dependent and-independent activation domains. PPARγ2 has an additional 28 amino acids at its amino terminus that renders its ligand-independent activation domain 5-10-fold more effective than that of PPARγ1. Insulin stimulates the ligand-independent activation of PPARγ1 and γ2 (ref. 5), however, obesity and nutritional factors only influence the expression of PPARγ2 in human adipocytes 6. Here, we report that a relatively common Pro12Ala substitution in PPARγ2 is associated with lower body mass index (BMI; P= 0.027; 0.015) and improved insulin sensitivity among middle-aged and elderly Finns. A significant odds ratio (4.35, P= 0.028) for the association of the Pro/Pro genotype with type 2 diabetes was observed among Japanese Americans. The PPARγ2 Ala allele showed decreased binding affinity to the cognate promoter element and reduced ability to transactivate responsive promoters. These findings suggest that the PPARγ2 Pro12Ala variant may contribute to the observed variability in BMI and insulin sensitivity in the general population.