Agonist-induced activation of peroxisome proliferator-activated receptor gamma (PPAR gamma) is known to cause adipocyte differentiation and insulin sensitivity. The biological role of PPAR gamma was investigated by gene targeting. Homozygous PPAR gamma-deficient embryos died at 10.5-11.5 dpc due to placental dysfunction. Quite unexpectedly, heterozygous PPAR gamma-deficient mice were protected from the development of insulin resistance due to adipocyte hypertrophy under a high-fat diet. These phenotypes were abrogated by PPAR gamma agonist treatment. Heterozygous PPAR gamma-deficient mice showed overexpression and hypersecretion of leptin despite the smaller size of adipocytes and decreased fat mass, which may explain these phenotypes at least in part. This study reveals a hitherto unpredicted role for PPAR gamma in high-fat diet-induced obesity due to adipocyte hypertrophy and insulin resistance, which requires both alleles of PPAR gamma.