FOXO1 and peroxisome proliferator-activated receptor-gamma (PPARgamma) are crucial transcription factors that regulate glucose metabolism and insulin responsiveness in insulin target tissues. We have shown that, in primary rat adipocytes, both factors regulate transcription of the insulin-responsive GLUT4 gene and that PPARgamma2 detachment from the GLUT4 promoter upon thiazolidinedione binding up-regulates GLUT4 gene expression, thus increasing insulin sensitivity (Armoni, M., Kritz, N., Harel, C., Bar-Yoseph, F., Chen, H., Quon, M. J., and Karnieli, E. (2003) J. Biol. Chem. 278, 30614-30623). However, the mechanisms regulating PPARgamma gene transcription are largely unknown. We studied the effects of FOXO1 on human PPARgamma gene expression in primary rat adipocytes and found that both genes are endogenously expressed. FOXO1 coexpression dose-dependently repressed transcription from either the PPARgamma 1 or PPARgamma2 promoter reporter by 65%, whereas insulin (100 nm, 20-24 h) either partially or completely reversed this effect. Phosphorylation-defective FOXO1 mutants T24A, S256A, S319A, and T24A/S256A/S319A still repressed the PPARgamma1 promoter and partially lost their effects on the PPARgamma2 promoter in either basal or insulin-stimulated cells. Use of DNA binding-defective FOXO1 (H215R) indicated that this domain is crucial for FOXO1 repression of the PPARgamma2 (but not PPARgamma1) promoter. Progressive 5'-deletion and gel retardation analyses revealed that this repression involves direct and specific binding of FOXO1 to the PPARgamma2 promoter; chromatin immunoprecipitation analysis confirmed that this binding occurs in cellulo. We suggest a novel paradigm to increase insulin sensitivity in adipocytes in which FOXO1 repression of PPARgamma, the latter being a repressor of the GLUT4 promoter, consequently leads to GLUT4 derepression/up-regulation, thus enhancing cellular insulin sensitivity. The newly identified FOXO1-binding site on the PPARgamma2 promoter may serve as a therapeutic target for type 2 diabetes.