We found that peroxisome proliferator-activated receptor-γ (PPARγ) mRNA was reduced by 77% in glomeruli of diabetic mice. Because mesangial cells play an important role in diabetic nephropathy, we examined regulation of type I collagen expression by PPARγ and transforming growth factor-β₁ (TGF-β₁) in mouse mesangial cells in the presence of 6 and 25 mM glucose. Mesangial cells contained functionally active PPARγ. Exposure to 25 mM glucose resulted in reduced PPARγ expression and transcriptional activity, accompanied by increased type I collagen expression. Restoration of PPARγ activity to normal levels in cells cultured in 25 mM glucose, by transfection with a PPARγ expression construct and treatment with the PPARγ agonist troglitazone, returned type I collagen levels toward normal values. Activation of PPARγ by troglitazone also decreased type I collagen mRNA and blocked TGF-β₁-mediated upregulation of type I collagen mRNA and protein. Moreover, PPARγ activation suppressed basal and activated TGF-β₁ responses in mesangial cells. This action was blocked by transfection of cells with a dominant-negative PPARγ construct. In summary, PPARγ suppresses the increased type I collagen mRNA and protein expression mediated by TGF-β₁ in mesangial cells.