Follicular thyroid carcinoma (FTC) frequently harbors the PAX8/PPARgamma fusion gene (PPFP); however, its oncogenic role and mechanism(s) of action remain undefined. We investigated PPFP's effects on cell growth, apoptosis, cell-cell, and cell-matrix interactions in immortalized human thyroid cells (Nthy-ori 3-1) and NIH 3T3 cells. PPFP expression increased the growth of transient and stable Nthy-ori transfectants ( approximately threefold by 72 h). There was an 8.4% increase of cells in the S+G2/M phase, a 7.8% decrease in cells in the G0+G1 phase and a 66% decline in apoptosis at 72 h. Stable Nthy-ori PPFP transfectants grew in soft agar, and PPFP-transfected NIH 3T3 cells exhibited efficient focus formation, suggesting loss of anchorage-dependent growth and contact inhibition, respectively. Overexpression of PPARgamma in Nthy-ori cells did not recapitulate PPFP's growth effects. Treatment of Nthy-ori cells with an irreversible PPARgamma inhibitor mimicked the growth-promoting effects of PPFP and co-expression of PPFP and PPARgamma blocked PPARgamma transactivation activity. Our data provide functional evidence that PPFP acts as an oncoprotein, whose transforming properties depend in part on inhibition of PPARgamma. Our data suggest that PPFP contributes to malignant transformation during FTC oncogenesis by acting on several cellular pathways, at least some of which are normally regulated by PPARgamma.