Lactation is a highly demanding lipid synthesis and transport process that is crucial for the development of newborn mammals. While PPARγ is known to promote adipogenesis and lipogenesis in adipose tissue, its role in the lactating mammary gland is unexplored. Here, we report that a targeted deletion of PPARγ in mice results in the production of “toxic milk” containing elevated levels of inflammatory lipids. Surprisingly, ingestion of this “toxic milk” causes inflammation, alopecia, and growth retardation in the nursing neonates. Genomic profiling reveals that PPARγ deficiency leads to increased expression of lipid oxidation enzymes in the lactating mammary gland. Consistently, metabolomic profiling detects increased levels of oxidized free fatty acids in the pups nursed by PPARγ-deficient mothers. Therefore, maternal PPARγ is pivotal for maintaining the quality of milk and protecting the nursing newborns by suppressing the production of inflammatory lipids in the lactating mammary gland.