Regulation of adipose cell mass is a critical homeostatic process in higher vertebrates. The conversion of fibroblasts into cells of the adipose lineage is induced by expression of the orphan nuclear receptor PPAR gamma. This suggests that an endogenous PPAR gamma ligand may be an important regulator of adipogenesis. By assaying arachidonate metabolites for their capacity to activate PPAR response elements, we have identified 15-deoxy-delta 12, 14-prostaglandin J2 as both a PPAR gamma ligand and an inducer of adipogenesis. Similarly, the thiazolidinedione class of antidiabetic drugs also bind to PPAR gamma and act as potent regulators of adipocyte development. Thus, adipogenic prostanoids and antidiabetic thiazolidinediones initiate key transcriptional events through a common nuclear receptor signaling pathway. These findings suggest a pivotal role for PPAR gamma and its endogenous ligand in adipocyte development and glucose homeostasis and as a target for intervention in metabolic disorders.