Halofenate has been shown previously to lower triglycerides in dyslipidemic subjects. In addition, significant decreases in fasting plasma glucose were observed but only in type 2 diabetic patients. We hypothesized that halofenate might be an insulin sensitizer, and we present data to suggest that halofenate is a selective peroxisome proliferator–activated receptor (PPAR)-γ modulator (SPPARγM). We demonstrate that the circulating form of halofenate, halofenic acid (HA), binds to and selectively modulates PPAR-γ. Reporter assays show that HA is a partial PPAR-γ agonist, which can antagonize the activity of the full agonist rosiglitazone. The data suggest that the partial agonism of HA may be explained in part by effective displacement of corepressors (N-CoR and SMRT) coupled with inefficient recruitment of coactivators (p300, CBP, and TRAP 220). In human preadipocytes, HA displays weak adipogenic activity and antagonizes rosiglitazone-mediated adipogenic differentiation. Moreover, in 3T3-L1 adipocytes, HA selectively modulates the expression of multiple PPAR-γ–responsive genes. Studies in the diabetic ob/ob mouse demonstrate halofenate’s acute antidiabetic properties. Longer-term studies in the obese Zucker (fa/fa) rat demonstrate halofenate’s comparable insulin sensitization to rosiglitazone in the absence of body weight increases. Our data establish halofenate as a novel SPPARγM with promising therapeutic utility with the potential for less weight gain.